Question

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

	Total			Per Unit
Sales (8,300 units)	$	282,200		$	34.00
Variable expenses		157,700			19.00
Contribution margin		124,500		$	15.00
Fixed expenses		54,300
Net operating income	$	70,200

Required:

(Consider each case independently):

1. What would be the revised net operating income per month if the sales volume increases by 90 units?

2. What would be the revised net operating income per month if the sales volume decreases by 90 units?

3. What would be the revised net operating income per month if the sales volume is 7,300 units?

Answer 1

Total	Total	Per Unit
Sales (8,300 units)	282,200	34
Variable expenses	157,700	19
Contribution margin	124,500	15
Fixed expenses	54,300
Net operating income	70,200
	Current Net Income	Impact on contribution margin due to changes	Revised Net Operating Income
Case 1	70,200	1,350	71,550
		(90*15)
Case 2	70,200	(1,350)	68,850
		- (90*15)
Case 3	70,200	(15,000)	55,200
		-(8300-7300)*15