Answer:
See explanation section.
Explanation:
Requirement 1
New sales volume after increasing 100 units = (10,000 + 100) = 10,100 units. The revised net operating income is calculated as follows
Whirly Corporation’s
Contribution format income statement
For the year ended December 31 20YY
Sales Revenue (10,100 × 35) = 353,500 (Note - 1)
Less: Variable expense (10,100 × 20) = 202,000 (Note - 2)
Contribution Margin = $151,500
Less: Fixed Expense $135,000
Net Operating Income $16,500
Note 1: Sale price per unit $350,000 ÷ 10,000 = $35
Note 2: Variable expense per unit $200,000 ÷ 10,000 = $20
Requirement 2
From requirement 1 we get,
Sale price per unit = $35
Variable expense per unit = $20
New sales volume after decreasing 100 units = (10,000 - 100) = 9,900 units. The revised net operating income is calculated as follows
Whirly Corporation’s
Contribution format income statement
For the year ended December 31 20YY
Sales Revenue (9,900 × 35) = 346,500
Less: Variable expense (9,900 × 20) = 198,000
Contribution Margin = $148,500
Less: Fixed Expense $135,000
Net Operating Income $13,500
Requirement 3
From requirement 1 we get
Sale price per unit = $35
Variable expense per unit = $20
If the sales volume is 9,000 units, the revised net operating income is calculated as follows
Whirly Corporation’s
Contribution format income statement
For the year ended December 31 20YY
Sales Revenue (9,000 × 35) = $315,000
Less: Variable expense (9,000 × 20) = $180,000
Contribution Margin = $135,000
Less: Fixed Expense $135,000
Net Operating Income $0
If the company sells 9000 units, there will be no loss, no profit.
