Question

# Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000...

 Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):
Sales \$ 22,700
Variable expenses 12,900
Contribution margin 9,800
Fixed expenses 8,232
Net operating income \$ 1,568
 5 If sales decline to 900 units, what would be the net operating income? (Do not round intermediate calculations.)
 6 If the selling price increases by \$1.60 per unit and the sales volume decreases by 100 units, what would be the net operating income? (Do not round intermediate calculations.)
7.

If the variable cost per unit increases by \$.60, spending on advertising increases by \$1,100, and unit sales increase by 250 units, what would be the net operating income? (Do not round intermediate calculations.)

 8 What is the break-even point in unit sales? (Do not round intermediate calculations.)

SOLUTION

5.

 Amount per unit (\$) Amount total 900 units (\$) Sales 22.70 20,430 Variable costs 12.90 11,610 Contrubition margin 9.80 8,820 Fixed expense 8,232 Net Operating income 588

6.

 Amount per unit (\$) Amount total 900 units (\$) Sales 22.70 + 1.60 = 24.30 21,870 Variable costs 12.90 11,610 Contrubition margin 10,260 Fixed expense 8,232 Net Operating income 2028

7.

 Amount per unit (\$) Amount total 1,250 units (\$) Sales 22.70 28,375 Variable costs 12.90 + 0.60 = 13.50 16,875 Contrubition margin 11,500 Fixed expense 8,232 + 1,100 = 9,332 9,332 Net Operating income 2,168

8. Break even point =  Fixed cost / Contribution per unit

= \$8,232 / (22.70 - 12.90)

= \$8,232 / 9.80

= 840