Question

Whirly Corporation’s contribution format income statement for the most recent month is shown below:

Total Per Unit
Sales (7,500 units) $ 255,000 $ 34.00
Variable expenses 142,500 19.00
Contribution margin 112,500 $ 15.00
Fixed expenses 54,600
Net operating income $ 57,900
Required:

(Consider each case independently):

1. What would be the revised net operating income per month if the sales volume increases by 50 units?

2. What would be the revised net operating income per month if the sales volume decreases by 50 units?

3. What would be the revised net operating income per month if the sales volume is 6,500 units?

Answer 1

1. $58,650

2. $57,150

3. $42,900

Step-by-step explanation:

The computation of revised net operating income per month if

1. The sales volume increases by 50 units.

Total Sales $256,700

(7,550 × $34)

Less: Variable expenses $143,450

(7,550 × $19)

Contribution margin $113,250

Less: Fixed expenses $54,600

Net operating income $58,650

2. The sales volume decreases by 50 units.

Total Sales $253,300

(7,450 × $34)

Less: Variable expenses $141,550

(7,450 × $19)

Contribution margin $111,750

Less: Fixed expenses $54,600

Net operating income $57,150

3. The sales volume is 6,500 units.

Total Sales $221,000

(6,500 × $34)

Less: Variable expenses $123,500

(6,500 × $19)

Contribution margin $97,500

Less: Fixed expenses $54,600

Net operating income $42,900