Question

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

	Total			Per Unit
Sales (7,600 units)	$	243,200		$	32.00
Variable expenses		152,000			20.00
Contribution margin		91,200		$	12.00
Fixed expenses		55,700
Net operating income	$	35,500

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

Answer 1)

Calculation of revised Net Operating Income per month if sales volume Increases by 80 units per month

Particulars	Amount (In $)
Sales (7,680 units X $ 32.00 per unit)	245,760
Less: Variable Expenses (7,680 units X $ 20.00 per unit)	153,600
Contribution margin	92,160
Less: Fixed Expenses	55,700
Net Operating Income	36,460

Therefore if sales volume increases to 7,680 units per month (i.e. 7,600 units per month + 80 units per month), the revised Net Operating Income of the company will be $ 36,460.

Answer 2)

Calculation of revised Net Operating Income per month if sales volume decreases by 80 units per month

Particulars	Amount (In $)
Sales (7,520 units X $ 32.00 per unit)	240,640
Less: Variable Expenses (7,520 units X $ 20.00 per unit)	150,400
Contribution margin	90,240
Less: Fixed Expenses	55,700
Net Operating Income	34,540

Therefore if sales volume Decreases to 7,520 units per month (i.e. 7,600 units per month - 80 units per month), the revised Net Operating Income of the company will be $ 34,540.

Answer 3)

Calculation of revised Net Operating Income per month if sales volume is 6,600 units per month

Particulars	Amount (In $)
Sales (6,600 units X $ 32.00 per unit)	211,200
Less: Variable Expenses (6,600 units X $ 20.00 per unit)	132,000
Contribution margin	79,200
Less: Fixed Expenses	55,700
Net Operating Income	23,500

Therefore if sales volume is 6,600 units per month, the revised Net Operating Income of the company will be $ 23,500.