Question

Decaprio Inc. produces and sells a single product. The company has provided its contribution format income statement for June.

Sales (5,500 units)	$	192,500
Variable expenses		82,500
Contribution margin		110,000
Fixed expenses		86,500
Net operating income	$	23,500

If the company sells 5,700 units, its net operating income should be closest to: (Do not round intermediate calculations.)

Answer 1

Step-1: Calculation of Sale, Variable cost and ccontrbution margin per unit
				Total	Unit Level	Per Unit
				a	b	a/b
	Sales			$       1,92,500	5500	$    35.00
	Variable Expense			$           82,500	5500	$    15.00
	Contribution Margin			$       1,10,000	5500	$    20.00
Step-2:Calculation of Net Operating income at 5.700 units level
			Per Unit	Total
	Sales (5.700 Units)		$    35.00	$       1,99,500
	Variable Expense		$    15.00	$           85,500
	Contribution Margin		$    20.00	$       1,14,000
	Fixed Expense			$           86,500
	Net Operating Income			$           27,500
Thus,
	At 5,700 units sold, Net Operating income should be					$ 27,500

Fixed Expense does not change due to change in volume.Variable Expense per unit is remain same.