Question

Bloomington Corporation reported the following on their contribution format income statement: Sales (12,000 units) $175,000 Less: Variable expenses 100,000 Contribution margin 75,000 Less: Fixed expenses 62,500 Net operating income $ 12,500 If sales increase by 10%, net operating income will increase by what amount?

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Sales (12,000 units) $175,000

Variable expenses 100,000

Contribution margin 75,000

Fixed expenses 62,500

Net operating income $ 12,500

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

Unitary selling price= 175,000/12,000= $14.58

Unitary variable cost= 100,000/12,000= $8.33

New income statement:

Sales= (12,000*1.10)*14.58= 192,456

Variable cost= 13,200*8.33= (109,956)

Contribution margin= 82,500

Fixed expenses= (62,500)

Net operating income= 20,000