Question

Required information The following information applies to the questions displayed below.) Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units the relevant range of production is 500 units to 1,500 units): Sales Variable expenses Contribution margin Fixed expenses 15,000 9,000 6, 000 3,120 2,880 Net operating income 2. What is the contribution margin ratio? in ratio

Answer 1

2)

Contribution Margin Ratio = Contribution Margin / Sales*100 = ($6000 / $15000)*100 = 40%

3)

Variable Expense Ratio = Variable Expense / Sales*100 = ($9000 / $15000)*100 = 60%

4.

Computation of net operating income if sale increase to 1001 units:

Current sales = 1000 units

Increased sales = 1001 units

Sale price per unit = $15

Variable cost per unit = $9

Particulars	Amount($)
Sales(1001*15)	15015
Variable expense(1001*9)	-9009
Contribution margin	6006
Fixed Expense	-3120
Net operating income	2886

Increase in Net operating income

$6

5.

Computation of net operating income if sale decline to 900 units:

Current sales = 1000 units

Decreased sales = 900 units

Sale price per unit = 15

Variable cost per unit = 9

Particulars	Amount($)
Sales(900*15)	13500
Variable expense(900*9)	-8100
Contribution margin	5400
Fixed Expense	-3120
Net operating income	2280

Net operating income

2280

6.

Computation of net operating income if selling price increase by $2 and sale unit’s decrease by 100 units:

Current sales = 1000 units

Decreased sales = 900 units

Sale price per unit = 15 +2 = 17

Variable cost per unit = 9

Particulars	Amount($)
Sales(900*17)	15300
Variable expense(900*9)	-8100
Contribution margin	7200
Fixed Expense	-3120
Net operating income	4080

Net operating income

$4080