Question

Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November. Sales (5,700 units) $ 319,200 Variable expenses 188,100 Contribution margin 131,100 Fixed expenses 106,500 Net operating income $ 24,600 If the company sells 5,300 units, its net operating income should be closest to:

Answer 1

Answer:

Net operating income= $15,400

Explanation:

Giving the following information:

Sales (5,700 units) $319,200

Variable expenses 188,100

Contribution margin 131,100

Fixed expenses 106,500

Net operating income $ 24,600

Sales now= 5,300 units

First, we need to calculate the unitary contribution margin:

Unitary contribution margin= 131,100/5,700= $23

Contribution margin for 5,300:

Total contribution margin= 23*5,300= $121,900

Fixed costs= 106,500

Net operating income= $15,400

Answer 2

Answer:

Net operating income is $ 15,400.00  

Explanation:

The company's operating income if it sells 5,300 units is calculated thus:

sales  (5,300*$319,200/5,700)                             $296,800.00  

variable expenses($188,100/5700*5300)          ($174,900.00)  

Contribution                                                          $ 121,900.00  

Fixed expenses                                                    ($106,500.00)

Net operating expenses                                      $ 15,400.00  

The net operating expenses dropped when 5,300 units were sold because the higher the volume, the more the contribution towards covering fixed expenses