Question

Oslo company prepared the following contribution format income statement based on a sales volume of 1000 units the relevant range of production as 500 units to 1500 units

Sales $60000

variable expenses 39000

contribution margin 21000

fixed expenses 14700

operating income 6300

5. If sales Decline to 900 units what would be the net operating income

6. If the selling price increases may $2 per unit and the sale volume and decreases by 100 units what would be the net operating income

7. If the variable cost per unit increases by $1 spending on advertising increases by 1500 and unit sales increased by 200 units what would be the net operating income

8. What is the break even point in the unit sales

Answer 1

	No of units	1000
	Selling price	$           60.00
	Sales	$   60,000.00
	Less: variable cost	$ -39,000.00
	Contribution	$   21,000.00
	Less: Fixed cost	$ -14,700.00
	Operating income	$     6,300.00
	5. Selling units declined to 900 units
	Sales	$   54,000.00	(900 X $60)
	Less: variable cost	$ -35,100.00	(900 X $39)
	Contribution	$   18,900.00
	Less: Fixed cost	$ -14,700.00
	Operating income	$     4,200.00
	6.If selling price increased by $2 and sales volume decreased by 100 units
	Sales	$   55,800.00	(900 X $62)
	Less: variable cost	$ -35,100.00	(900 X $39)
	Contribution	$   20,700.00
	Less: Fixed cost	$ -14,700.00
	Operating income	$     6,000.00
	7.If the variable cost per unit increases by $1 spending on advertising increases by 1500 and unit sales increased by 200 units
	Sales	$   72,000.00	(1200 X $60)
	Less: variable cost	$ -48,000.00	(1200 X $40)
	Contribution	$   24,000.00
	Less: Fixed cost	$ -16,200.00	($ 14700 + $ 1500)
	Operating income	$     7,800.00
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