Question

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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. If the selling price increases by $2 per unit and the sales volume decreases by 100 units, what would be the net operating income?

2. If the variable cost per unit increases by $1, spending on advertising increases by $1,300, and unit sales increase by 160 units, what would be the net operating income?

3. What is the break-even point in unit sales?

Answer 1

1	Sales(900*42)	37,800
	Variable expenses(900*26)	23,400
	Contribution margin	14,400
	Fixed expenses	8,680
	Net operating income	5,720
	Current selling price(40000/1000)	40
	Current Variable expenses(26000/1000)	26
2	Sales(1160*40)	46,400
	Variable expenses(1160*27)	31,320
	Contribution margin	15,080
	Fixed expenses(8680+1300)	9,980
	Net operating income	5,100
3	Contribution per unit 14000/1000	14
	Fixed cost	8,680
	Break-even point	620