Answer:
a. $700,000
b. 40% increase
Explanation:
As per the data given in the question,
a)
Increase in sales = 20%
So last unit sale
= Unit sales ÷ increased unit sales percentage
= 60,000 ÷ 1.2
= 50,000
Previous year operating income is
= Last unit sales × (Selling price per unit - variable cost per unit) - Fixed expenses
= 50,000 × ($50-$30) - $500,000
= $500,000
Current Net operating income is
= Current units sales × (Selling price per unit - variable cost per unit) - Fixed expenses
= 60,000 × ($50-$30) - $500,000
= $700,000
b)
Percentage increase in net operating income is
= (Current Net operating income - Previous year operating income) ÷ Previous year operating income
= ($700,000 - $500,000) ÷ $500,000
= 40% increase
The net operating income is the income which is come after deducting all the variable cost, fixed cost from the sales revenue i.e earned by the company
