Question

Question 12 of 50 Next QuestionUnsaved change Moving to the next question prevents changes to this answer. Nocum Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (3,000 units) $ 120,000 Variable expenses 90,000 Contribution margin 30,000 Fixed expenses 21,000 Net operating income $ 9,000 If sales decline to 2,900 units, the net operating income would be closest to:

Answer 1

$8,000

Explanation:

For the computation of net operating income first, we need to find out the contribution margin per unit and total contribution margin which is shown below:-

Contribution margin per unit = Contribution margin ÷ Sales in units

= ($30,000 ÷ 3,000)

= $10 per unit

Total Contribution margin at 2900 units = Contribution margin per unit × Reduced units

= $10 × 2,900

= $29,000

Net operating income =

Total Contribution margin - Fixed expenses

= $29,000 - $21,000

= $8,000