Question

Whirly Corporation’s most recent income statement is shown below:

	Total		Per Unit
Sales (7,200 units)	$	237,600	$	33.00
Variable expenses		129,600		18.00
Contribution margin		108,000	$	15.00
Fixed expenses		54,800
Net operating income	$	53,200

Required:

Prepare a new contribution format income statement under each of the following conditions (consider each case independently):

1.	The sales volume increases by 50 units.

      

2.	The sales volume decreases by 50 units.

      

3.	The sales volume is 6,200 units.

     

Answer 1

Prepare a new contribution format income statement under each of the following conditions (consider each case independently):

1. The sales volume increases by 50 units

Sales (7250*33)	239250
Less: Variable cost (7250*18)	(130500)
Contribution margin (7250*15)	108750
Less: Fixed cost	(54800)
Net operating income	53950

2. The sales volume decreases by 50 units.

Sales (7150*33)	235950
Less: Variable cost (7150*18)	(128700)
Contribution margin (7150*15)	107250
Less: Fixed cost	(54800)
Net operating income	52450

3.The sales volume is 6,200 units.

Sales (6200*33)	204600
Less: Variable cost (6200*18)	(111600)
Contribution margin (6200*15)	93000
Less: Fixed cost	(54800)
Net operating income	38200