Question

Whirly Corporation’s contribution format income statement for the most recent month is shown below:

	Total			Per Unit
Sales (9,000 units)	$	315,000		$	35.00
Variable expenses		162,000			18.00
Contribution margin		153,000		$	17.00
Fixed expenses		54,700
Net operating income	$	98,300

Required:

(Consider each case independently):

1. What would be the revised net operating income per month if the sales volume increases by 90 units?

2. What would be the revised net operating income per month if the sales volume decreases by 90 units?

3. What would be the revised net operating income per month if the sales volume is 8,000 units?

1.	Revised net operating income
2.	Revised net operating income
3.	Revised net operating income

Lin Corporation has a single product whose selling price is $140 per unit and whose variable expense is $70 per unit. The company’s monthly fixed expense is $32,600.

Required:

1. Calculate the unit sales needed to attain a target profit of $6,250.

2. Calculate the dollar sales needed to attain a target profit of $8,000. (Round your answer to the nearest whole number.)

1.	Units sales to attain target profit
2.	Dollar sales to attain target profit

Answer 1

Answer-

1	Revised net operating income	$99830
2	Revised net operating income	$96770
3	Revised net operating income	$81300

WHIRLY CORPORATION
Net Operating income
Particulars		Amount
		$
Sales	(9000 units+90 units)*$35 per unit	318150
Less:- Variable cost	9090 unit*$18 per unit	163620
Contribution		154530
Less:- Fixed costs		54700
Net operating income		99830
WHIRLY CORPORATION
Net Operating income
Particulars		Amount
		$
Sales	(9000 units-90 units)*$35 per unit	311850
Less:- Variable cost	8910 unit*$18 per unit	160380
Contribution		151470
Less:- Fixed costs		54700
Net operating income		96770
WHIRLY CORPORATION
Net Operating income
Particulars		Amount
		$
Sales	8000 units*$35 per unit	280000
Less:- Variable cost	8000 unit*$18 per unit	144000
Contribution		136000
Less:- Fixed costs		54700
Net operating income		81300

Answer-1)- Units sales to attain target profit=555 units.

Explanation- Units sales to attain target profit= (Fixed costs+ Target profit)/Contribution margin per unit

= ($32600+$6250)/$70 per unit

= 555 units

Where- Contribution margin per unit = Selling price per unit- variable cost per unit

= $140 per unit-$70 per unit

= $70 per unit

2)- Dollar sales to attain target profit =$81200.

Explanation- Dollar sales to attain target profit= (Fixed costs+ Target profit)/Contribution margin ratio

= ($32600+$8000)/50%

=$81200

Where- Contribution margin ratio = ($70 per unit/$140 per unit)*100

= 50%