Showing results for wright corporation contribution format income statement for

Question

Showing results for wright corporation contribution format income statement for last month appears below; Sales $100,000, Variable expenses 56,000, Contribution margin 44,000 Fixed expenses 31,500 net operating income $12,500 Search instead for wright corporation contribution format income statement for lasst month appears below; Sales $100,000, Variable expenses 56,000, Contribution margin 44,000 Fixed expenses 31,500 net operating income $12,500 There were no beginning or ending inventories. the company produced and sold 4,000 units during the the month. If sales decrease by 1,000 units by next month, by how would fixed expensese have to be reduced to maintain the current net operating income

Explanation / Answer

Contribution marging per unit = 44,000/ 4,000 = 11

Contribution margin @3,000 units = 33,000

To maintain the same net operating income, the fixed expenses will have to be reduced by 11,000

Current net income = 12,500

New Contribution margin = 33,000

New Fixed expenses = 33,000 - 12,500 = 20,500

Reduction in fixed expenses = 31,500-20,500 = 11,000

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