Question

Exercise 6-1 The Effect of Changes in Activity on Net Operating Income [LO6-1]Whirly Corporation’s contribution format income statement for the most recent month is shown below: Total Per UnitSales (10,000 units)$350,000 $35.00 Variable expenses 200,000 20.00 Contribution margin 150,000 $15.00 Fixed expenses 135,000 Net operating income$15,000 Required:(Consider each case independently): 1. What would be the revised net operating income per month if the sales volume increases by 100 units?2. What would be the revised net operating income per month if the sales volume decreases by 100 units?3. What would be the revised net operating income per month if the sales volume is 9,000 units?

Answer 1

Answer:

Instructions are below.

Explanation:

Giving the following information:

Sales (10,000 units)$350,000 ($35.00)

Variable expenses= 200,000 (20.00)

Contribution margin= 150,000 ($15.00)

Fixed expenses 135,000

Net operating income= $15,000

1) Sales= 10,100 units

Contribution margin= (10,100*15)= 151,500

Fixed costs= (135,000)

Net income= 16,500

2) Sales= 9,900 units

Contribution margin= (9,900*15)= 148,500

Fixed costs= (135,000)

Net income= 13,500

3)  Sales= 9,000 units

Contribution margin= (9,000*15)= 135,000

Fixed costs= (135,000)

Net income= 0