Question

Wawasee Lumber Company had the following data for July.
		Units	Total	Per Unit
	Sales	14500	826500	57
	Variable Expenses		493000	34
	Contribution Margin		333500	23
	Fixed Expenses		165000
	Net Operating Income		168500

1.   What would be the Net Operating Income if sales volume increased to 16,000 units?

2.   What would be the Net Operating Income if sales volume decreased to 13,000 units?

3. What would the Contribution Margin per unit be if the sales price is reduced by $4.00?

4. What would the Net Operating Income be if everything remains the same except variable expense per unit increased by $3.00 per unit?

5. What is the breakeven point in sales units (assuming nothing else changes)?

Answer 1

1) If Sales Volume Increased to 16000 units
Particulars	Units	Per Unit	Total
Sales	16000	57	912000
Variable Expenses		34	544000
Contribution Margin		23	368000
Fixed Expenses			165000
Net Operating Income			203000
2) If Sales Volume Decreased to 13000 units
Particulars	Units	Per Unit	Total
Sales	13000	57	741000
Variable Expenses		34	442000
Contribution Margin		23	299000
Fixed Expenses			165000
Net Operating Income			134000
3) Contribution Margin per unit If Sales price reduced by $4
Particulars	Units	Per Unit	Total
Sales	14500	53	768500
Variable Expenses		34	493000
Contribution Margin		19	275500
Fixed Expenses			165000
Net Operating Income			110500
4) Net operating income if variable cost increases by $3
Particulars	Units	Per Unit	Total
Sales	14500	57	826500
Variable Expenses		37	536500
Contribution Margin		20	290000
Fixed Expenses			165000
Net Operating Income			125000
5) Break Even Point if nothing is changed
Particulars	Units	Per Unit	Total
Sales	7174	57	408913
Variable Expenses		34	243913
Contribution Margin		23	165000
Fixed Expenses			165000	7173.913
Net Operating Income			-0.001
BEP = Fixed Expenses / Margin Per unit