Question

Remmel Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (6,000 units) $ 300,000 Variable expenses 240,000 Contribution margin 60,000 Fixed expenses 59,000 Net operating income $ 1,000 If the selling price increases by $3 per unit and the sales volume decreases by 400 units, the net operating income would be closest to:
(A) $19,000
(B) $16,800
(C) $13,800
(D) $17,733

Answer 1

Answer:

The correct answer is C: $13,800

Explanation:

Giving the following information:

Sales (6,000 units) $ 300,000

Variable expenses 240,000

Contribution margin 60,000

Fixed expenses 59,000

Net operating income $ 1,000

Selling price= (300000/6000)= $50

Unitary variable cost= 240000/6000= $40

Unitary contribution margin= 10

Now:

Selling price= 53

Q= 5600

Unitary contribution margin= 10 + 3= 13

Net operating income:

Contribution margin= 5400*13=$72,800

Fixed expense= 59000

Net operating income= 13800