Answer:
Net operating income = $240,000
Explanation:
At first we have to determine the break-even sales.
We know,
Break-even sales in units = Fixed expense ÷ (Sales price per unit - Variable cost per unit)
Break-even sales in units = $80,000 ÷ ($100 - 80)
Break-even sales in units = $80,000 ÷ $20 = 4,000 units.
Therefore, if the company sells 4,000, there will be no operating income.
If the total sales of Rihanna, Inc. is increased by $400,000, it means the company sells $400,000 ÷ $100 = 4,000 more units.
Therefore,
Sales = $400,000
Less: Variable expense (4,000*$40) = $160,000
Contribution Margin = $240,000
The new net operating income will be $240,000 as the fixed expense remains same for the entire period.
