Question

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

	Total			Per Unit
Sales (7,100 units)	$	220,100		$	31.00
Variable expenses		134,900			19.00
Contribution margin		85,200		$	12.00
Fixed expenses		55,500
Net operating income	$	29,700

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 6,100 units?

Answer 1

1.

Revised Units= 7,100 Units + 90 Units

= 7,190 Units

Sales Value = 7,190 Units * $ 31

Variable Cost = 7,190 Units * $ 19

	Total		Per Unit
Sales (7,190 units)	$	2,22,890	$	31
Less :Variable expenses		1,36,610		19
Contribution margin		86,280	$	12
Less :Fixed expenses		55,500
Net operating income	$	30,780

Hence, the correct answer is $ 30,780

2.

Revised Units= 7,100 Units - 90 Units

= 7,010 Units

Sales Value = 7,010 Units * $ 31

Variable Cost = 7,010 Units * $ 19

	Total		Per Unit
Sales (7,010 units)	$	2,17,310	$	31
Less :Variable expenses		1,33,190		19
Contribution margin		84,120	$	12
Less :Fixed expenses		55,500
Net operating income	$	28,620

Hence the correct answer is $ 28,620

3.

Revised Units= 6,100 Units

Sales Value = 6,100 Units * $ 31

Variable Cost = 6,100 Units * $ 19

Hence the correct answer is $ 17,700

	Total		Per Unit
Sales (6,100 units)	$	1,89,100	$	31
Less :Variable expenses		1,15,900		19
Contribution margin		73,200	$	12
Less :Fixed expenses		55,500
Net operating income	$	17,700