Question

g Duve Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (2,000 units) $40,000 Variable expenses 24,000 Contribution margin 16,000 Fixed expenses 11,200 Net operating income $4,800 If the selling price increases by $4 per unit and the sales volume decreases by 200 units, the net operating income would be closest to:

Answer 1

Answer:

Net operating income= 10,400

Explanation:

Giving the following information:

Sales (2,000 units) $40,000

Variable expenses 24,000

Contribution margin 16,000

Fixed expenses 11,200

Net operating income $4,800

If the selling price increases by $4 per unit and the sales volume decreased by 200 units:

First, we need to determine the unitary selling price and unitary variable cost:

Selling price= 40,000/2,000= $20 + $4= $24

UNitary variable cost= 24,000/2,000= $12

Now, we can calculate the new net operating income:

Sales= 1,800*24= 43,200

Variable cost= 1,800*12= (21,600)

Contribution margin= 21,600

Fixed costs= (11,200)

Net operating income= 10,400