Answer:
See the explanation.
Explanation:
Requirement 1
New sales volume after increasing 40 units = (7,200 + 40) = 7,240 units. The revised net operating income is calculated as follows
Whirly Corporation’s
Contribution format income statement
For the year ended December 31 20YY
Sales Revenue (7,240 × 33) = $ 237,600 (Note - 1)
Less: Variable expense (7,240 × 19) = 136,800 (Note - 2)
Contribution Margin = $100,800
Less: Fixed Expense $54,900
Net Operating Income $45,900
Note 1: Sale price per unit $237,600 ÷ 7,200 = $35
Note 2: Variable expense per unit $136,800 ÷ 7,200 = $20
Requirement 2
From requirement 1 we get,
Sale price per unit = $33
Variable expense per unit = $19
New sales volume after decreasing 40 units = (7,200 - 40) = 7,160 units. The revised net operating income is calculated as follows
Whirly Corporation’s
Contribution format income statement
For the year ended December 31 20YY
Sales Revenue (7,160 × 33) = $236,280
Less: Variable expense (7,160 × 19) = $136,040
Contribution Margin = $100,240
Less: Fixed Expense $54,900
Net Operating Income $45,340
Requirement 3
From requirement 1 we get
Sale price per unit = $33
Variable expense per unit = $19
If the sales volume is 6,200 units, the revised net operating income is calculated as follows
Whirly Corporation’s
Contribution format income statement
For the year ended December 31 20YY
Sales Revenue (6,200 × 33) = $204,600
Less: Variable expense (6,200 × 19) = $117,800
Contribution Margin = $86,800
Less: Fixed Expense $54,900
Net Operating Income $31,900
If the company sells 6,200 units, the company can still make a profit.
