Question

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

	Total			Per Unit
Sales (7,600 units)	$	258,400		$	34.00
Variable expenses		144,400			19.00
Contribution margin		114,000		$	15.00
Fixed expenses		54,400
Net operating income	$	59,600

Required:

(Consider each case independently):

1. What would be the revised net operating income per month if the sales volume increases by 80 units?

2. What would be the revised net operating income per month if the sales volume decreases by 80 units?

3. What would be the revised net operating income per month if the sales volume is 6,600 units?

Answer 1

1.

Income statement

Sales (7,680 x 34)	261,120
Variable expenses (7,680 x 19)	145,920
Contribution margin	$115,200
Fixed expenses	54,400
Net operating income	$60,800

net operating income per month if the sales volume increases by 80 units = $60,800

2.

Sales (7,520) x 34)	255,680
Variable expenses (7,520 x 19)	142,880
Contribution margin	$112,800
Fixed expenses	54,400
Net operating income	$58,400

net operating income per month if the sales volume Decrease by 80 units = $58,400

3.

Sales (6,600 x 34)	224,400
Variable expenses (6,600 x 19)	125,400
Contribution margin	$99,000
Fixed expenses	54,400
Net operating income	$44,600

net operating income per month if the sales volume is 6,600 units= $44,600

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