Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units

Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):


Sales	$	40,000
Variable expenses		26,000
Contribution margin		14,000
Fixed expenses		8,680
Net operating income	$	5,320

1. What is the contribution margin ratio?

2. What is the variable expense ratio?

3. If sales decline to 900 units, what would be the net operating income?

Solutions

Expert Solution

1.contribution margin ratio=contribution margin /Sales

=(14000/40000)=35%

2.Variable expense ratio=(Variable expenses/Sales)

(26000/40000)=65%

3.Sales price per unit=(400000/1000)=$40 per unit

Hence new sales=(40*900)=$36000

New contribution margin =(36000*0.35)=$12600

LEss:Fixed costs=($8680)

Net operating income=$3920.

ekkarill92 answered 1 year ago

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