Question

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

	Total			Per Unit
Sales (8,000 units)	$	272,000		$	34.00
Variable expenses		160,000			20.00
Contribution margin		112,000		$	14.00
Fixed expenses		54,400
Net operating income	$	57,600

Required:

(Consider each case independently):

1. What would be the revised net operating income per month if the sales volume increases by 70 units?

2. What would be the revised net operating income per month if the sales volume decreases by 70 units?

3. What would be the revised net operating income per month if the sales volume is 7,000 units?

Answer 1

1.

	Total	Per Unit
Sales (8,070 units)	274,380	34
Variable expenses	161,400	20
Contribution margin	112,980	14
Fixed expenses	54,400
Net operating income	$58,580

2.

	Total	Per Unit
Sales (7,930 units)	269,620	34
Variable expenses	158,600	20
Contribution margin	111,020	14
Fixed expenses	54,400
Net operating income	$56,620

3.

	Total	Per Unit
Sales (7,000 units)	238,000	34
Variable expenses	140,000	20
Contribution margin	98,000	14
Fixed expenses	54,400
Net operating income	$43,600

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