Question

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

	Total			Per Unit
Sales (7,500 units)	$	240,000		$	32.00
Variable expenses		150,000			20.00
Contribution margin		90,000		$	12.00
Fixed expenses		55,600
Net operating income	$	34,400

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 6,500 units?

Answer 1

· Requirements asked

1	Revised Net Operating Income	$35,360
2	Revised Net Operating Income	$33,440
3	Revised Net Operating Income	$22,400

· Working

	Requirement	1	2	3
A	Units	7,580	7,420	6,500
B = A x 32	Sales	$242,560	$237,440	$208,000
C = A x 20	Variable expenses	$151,600	$148,400	$130,000
D = B - C	Contribution margin	$90,960	$89,040	$78,000
E	Fixed expenses	$55,600	$55,600	$55,600
F = D - E	Revised Net Operating Income	$35,360	$33,440	$22,400