Question

LLC has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (3,000 units) $ 90,000
Variable expenses 58,500
Contribution margin 31,500
Fixed expenses 21,000
Net operating income $ 10,500

Required: If sales decline to 2,600 units enter the resulting net operating income in the box below

Answer 1

Net operating income = $6,300

Step-by-step explanation:

Given:

At 3,000 unit production:

Sales = $90,000

Variable expenses = $58,500

Fixed expenses = $21,000

Net operating income $ 10,500

Computation:

Selling price for 2,600 units = (Sales / Number of units sold)2,600

Selling price for 2,600 units = ($90,000 / 3,000 )2,600

Selling price for 2,600 units = $78,000

Variable cost for 2,600 units = (Variable expenses / Number of units sold)2,600

Variable cost for 2,600 units = ($58,500 / 3,000 )2,600

Variable cost for 2,600 units = $50,700

Net operating income = Selling price for 2,600 units - Variable cost for 2,600 units - Fixed expenses

Net operating income = $78,000 - $50,700 - $21,000

Net operating income = $6,300