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Robin Corp. provided the following GAAP incomestatement. The functional income statement for sales of 20,000...

Robin Corp. provided the following GAAP income statement. The functional income statement for sales of 20,000 pairs of sunglasses (sales px $50 each) is provided below:

Sales $1,000,000

COGS

Variable manufacturing $525,000

Fixed manufacturing 210,000 735,000

Gross profit 265,000

Sell & Adm.

Variable selling/administrative $50,000

Fixed selling/administrative 40,000 90,000

Op. inc. $ 175,000

Prepare a contribution margin income statement including percentages and unit costs for 21,000 units

Assume Robin sold 1,000 more units. By how much would operating income increase?

Assume Robin’s sales decreased $1,000, how much would operating income decrease

Expert Solution

Analysis of the functional income statement for sales of 20000 pairs of sunglasses -

fixed cost per unit = 250000/20000 = 12.5

Preparation of Contribution margin income statement including percentages and unit cost for 21000 units-

fixed cost per unit = 250000/21000

= 11.90

Calculation of the operating income increase Assume Robin's sold 1000 more unit -

fixed cost per unit = 250000/22000 = 11.36

operating income increase by = 217500-196250 = $ 21250

Calculation of the operating income decrease Assume Robin's sales decreased $ 1000 -

Robin's sales decreased by $1000 means sale reduced by 1000/50 = 20 units now unit sold = 21000-20 = 20980

operating income decrease by = 196250 - 195825 = $ 425

ekkarill92 answered 2 years ago

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