Question

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: Multiple Choice $10,400 $7,200 $11,520 $12,800

Answer 1

Answer:

$10,400

Explanation:

Given that,

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.

Sales:

= Number of units sold × Selling price per unit

= (2,000 - 200) × ($20 + $4)

= 1,800 × $24

= $43,200

Variable expenses:

$=\frac{24,000}{2,000}\times 1,800$

= $21,600

Contribution margin:

= Sales - Variable cost

= $43,200 - $21,600

= $21,600

Net operating income:

= Contribution margin - Fixed expenses

= $21,600 - $11,200

= $10,400