Question

Remmel Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (6,000 units) $ 300,000 Variable expenses 240,000 Contribution margin 60,000 Fixed expenses 59,000 Net operating income $ 1,000 If the selling price increases by $3 per unit and the sales volume decreases by 400 units, the net operating income would be closest to:

Answer 1

Answer:

$13,800

Explanation:

Calculation for what the net operating income would be closest to:

First step is to calculate the Unit contribution margin

Selling price per unit $50

($300,000 ÷ 6,000 units)

Less Variable cost per unit $40

($240,000 ÷ 6,000 units)

Unit contribution margin $10

Selling price $53 per unit

($50 per unit + $3 per unit)

Variable cost per price $40 per unit

Unit contribution margin $13 per unit

Now let calculate the net operating income

Contribution margin $72,800

(Unit contribution margin $13 per unit*Unit sales(6,000 units − 400 units)

Less Fixed expenses 59,000

Net operating income$13,800

Therefore the net operating income would be closest to:$13,800