Question

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.)

Answer 1

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