Data for Chocolate Corporation are shown below:
Per Unit | Percent of Sales | ||||||
Selling price | $ | 135 | 100 | % | |||
Variable expenses | 81 | 60 | |||||
Contribution margin | $ | 54 | 40 | % | |||
Fixed expenses are $87,000 per month and the company is selling 2,900 units per month.
Refer to the original data. How much will net operating income increase (decrease) per month if the company uses higher-quality components that increase the variable expense by $5 per unit and increase unit sales by 20%.
Net Operating Income increases/decreases by ________
Net Operating Income increases/decreases by $13,920
Working
Current situation | ||||
Amount | % | |||
Revenue | $ 391,500.00 | 100.00% | ||
Variable costs | $ 234,900.00 | 60.00% | ||
Contribution Margin | $ 156,600.00 | 40.00% | ||
Fixed costs | $ 87,000.00 | 22.22% | ||
Net income | $ 69,600.00 | 17.78% |
.
If sales increase by 580 units from 2900 to 3480 | ||||
Amount | % | |||
Revenue (3480 x 135) | $ 469,800.00 | 100.00% | ||
Variable costs (3480 x 86) | $ 299,280.00 | 63.70% | ||
Contribution Margin | $ 170,520.00 | 36.30% | ||
Fixed costs | $ 87,000.00 | 18.52% | ||
Net income | $ 83,520.00 | 17.78% |
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