Wallen Corporation is considering eliminating a department that has an annual contribution margin of $80,000 and $160,000 in ann
1 answer:
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Answer:
1) NOI = $90,240
2) NOI = 29,250
3) NOI = 133,260
4) NOI = 110,190
Explanation:
<em>The question is incomplete.</em>
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<em>Sales (38,000 units) $342,000 ($9.00 per unit)</em>
<em>Variable expenses $228,000 ($6.00 per unit)</em>
<em>Contribution margin $114,000 ($3.00 per unit)</em>
<em>Fixed expenses $42,000 </em>
<em>Net operating income $72,000</em>
1. What is the revised net operating income if unit sales increase by 16%
If unit sales increase, we can calculate this with a 16% increase in the contribution margin.
2. What is the revised net operating income if the selling price decreases by $1.50 per unit and the number of units sold increases by 25%?
A reduction of $1.50 in price means a reduction of the same amount in the contribution margin per unit (CMu), as the variable expenses stay the same .
Also, the contribution margin increases by 25%, for the increase in units sold (q).
3. What is the revised net operating income if the selling price increases by $1.50 per unit, fixed expenses increase by $6,000, and the number of units sold decreases by 6%?
The selliing price will be added to the contribution margin per unit.
The units sold are increased 6%.
4. What is the revised net operating income if the selling price per unit increases by 20%, variable expenses increase by 30 cents per unit, and the number of units sold decreases by 11%?
The contribution margin per unit, with a increase in price and an increase in variable cost, becomes:
The units sold is now:
Then, the net operating income becomes: