Question

Sjostrom Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. If the selling price increases by $3 per unit and the sales volume decreases by 600 units, the net operating income would be closest to:

Answer 1

Answer:

$24,800

Explanation:

Calculation for what the net operating income would be closest to

First step is to calculate the Selling price

Selling price $43 per units

($280,000 ÷ 7,000 units=$40 per unit)

($40 per unit + $3 per unit)

Second step is to calculate the Variable cost per price

Variable cost per price $26 per units

($182,000 ÷ 7,000 units)

Third step is to calculate the Unit sales

Unit sales 6,400 units

(7,000 units − 600 units)

Now let calculate the net operating income

Contribution margin $108,800

[($40 per unit-$26 per units)*6,400 units]

($17*6,400 units)

Less Fixed Expenses $84,000

Net operating income $24,800

($108,800-84,000)

Therefore the net operating income would be closest to: $24,800