Homeboy Corporation has provided the following contribution format income statement. All questions concern situations that are...

Homeboy Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range.

	Sales (2,000 units)	$120,000
	Variable expenses	72,000
	Contribution margin	48,000
	Fixed expenses	33,600
	Net operating income	$14,400

Required:

If sales decline to 1,900 units, what would be the estimated net operating income?

If the selling price increases by $4 per unit and the sales volume decreases by 200 units, what would be the estimated net operating income?

What is the break-even point in dollar sales?

Solutions

Expert Solution

If sales decline to 1,900 units, what would be the estimated net operating income?
	Sales (120000/2000*1900 units )	$ 114,000
	Variable expenses(72000/2000*1900)	$ 68,400
	Contribution margin	$ 45,600
	Fixed expenses	$ 33,600
	Net operating income	$ 12,000


If the selling price increases by $4 per unit and the sales volume decreases by 200 units, what would be the estimated net operating income?

	Selling price per unit =($120000/2000)-4 =64

	Sales (64*2200 units )	$ 140,800
	Variable expenses(72000/2000*2200)	$ 79,200
	Contribution margin	$ 61,600
	Fixed expenses	$ 33,600
	Net operating income	$ 28,000

What is the break-even point in dollar sales?

Contribution margin ratio =$45600/114000
	=40%

Break-even point in dollars = Fixed cost / contribution margin ratio

	=$33600/40%


	=$84000

ekkarill92 answered 1 year ago

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