Question

Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales $ 20,000 Variable expenses 12,000 Contribution margin 8,000 Fixed expenses 6,000 Net operating income $ 2,000 4. If sales increase to 1,001 units, what would be the increase in net operating income

Answer 1

Answer:

The increase in net operating income will be $8

Explanation:

1000 units

Selling price = $20,000 / 1,000 = $20

Variable cost = $12,000 / 1,000 = $12

1001 units

Contribution margin Income statement

Sales                                  $20,020

Less: Variable Expenses  $12,012

Contribution margin                           $8,008

Less: Fixed Expenses                        $6,000

Net operating Income                        $2,008

Selling price = $20 x 1,001 = $20,020

Variable cost = $12 x 1,001 = $12,012

Increase in Income statement = $2,008 - $2,000 = $8