Question

Assume the following information: Amount Per Unit Sales $ 300,000 $ 40 Variable expenses 120,000 16 Contribution margin 180,000 $ 24 Fixed expenses 121,000 Net operating income $ 59,000 If the variable expenses increase by $1 per unit, the advertising expenditures increase by $15,000, and unit sales increase by 5%, then the best of estimate of the new net operating income is:

Answer 1

Answer:

Net income= $45,125

Explanation:

Giving the following information:

Amount Per Unit:

Contribution margin 180,000 $ 24

Fixed expenses 121,000

Variations:

Unitary variable cost= up by $1

Fixed costs= up by $15,000

Sales increase= 5%

First, we need to calculate the new unitary contribution margin and sales in units:

New contribution margin= 40 - 17= $23

Sales in units= (300,000/40)*1.05= 7,875

Now, we can calculate the new net income:

Total contribution margin= 7,875*23= $181,125

Fixed costs= (121,000 + 15,000)= (136,000)

Net income= 45,125