Question

Exercise 5-1 The Effect of Changes in Activity on Net Operating Income (L05-1) Whirly Corporation's contribution format income statement for the most recent month is shown below: Sales (7,400 units) Variable expenses Contribution margin Fixed expenses Net operating income Total $ 259,000 133,200 125,800 55,700 $ 70,100 Per Unit $ 35.00 18.00 $ 17.00 Required: (Consider each case independently): 1. What would be the revised net operating income per month I the sales volume increases by 90 units? 2. What would be the revised net operating income per month the sales volume decreases by 90 units? 3. What would be the revised net operating income per month if the sales volume is 6,400 units? 1. Revised net operating income 2. Revised net operating income 3. Revised net operating income

Answer 1

case 1) compute net operating income, if sales volume increases by 90units

Particular	per unit	amount ($)
Sales(7400+90)7490units	$35	262150
(-) variable cost	$18	(134820)
CONTRIBUTION	$17	127330
(-) fixed expenses		(55700)
NET OPERATING INCOME		71630

case 2) compute net operating income,if sales volume decrease by 90units

Particular	per unit	amount ($)
Sales(7400-90)7310units	$35	255850
(-) variable expenses	$18	(131580)
CONTRIBUTION	$17	124270
(-) fixed expenses		(55700)
NET OPERATING INCOME		68570

Case 3) compute net operating income,if sale volume is 6400units

Particular	per unit	amount ($)
Sales (6400) unit's	$35	224000
(-) variable expenses	$18	(115200)
CONTRIBUTION	$17	108800
(-) fixed expenses		(55700)
NET OPERATING INCOME		53100

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