Whirly Corporation’s contribution format income statement for the most recent mo

Question

Whirly Corporation’s contribution format income statement for the most recent month is shown below:

Required:

(Consider each case independently):

1. What would be the revised net operating income per month if the sales volume increases by 90 units?

2. What would be the revised net operating income per month if the sales volume decreases by 90 units?

3. What would be the revised net operating income per month if the sales volume is 6,100 units?

Total Per Unit Sales (7,100 units) $ 220,100 $ 31.00 Variable expenses 134,900 19.00 Contribution margin 85,200 $ 12.00 Fixed expenses 55,500 Net operating income $ 29,700

Explanation / Answer

1.

Revised Units= 7,100 Units + 90 Units

= 7,190 Units

Sales Value = 7,190 Units * $ 31

Variable Cost = 7,190 Units * $ 19

Hence, the correct answer is $ 30,780

2.

Revised Units= 7,100 Units - 90 Units

= 7,010 Units

Sales Value = 7,010 Units * $ 31

Variable Cost = 7,010 Units * $ 19

Hence the correct answer is $ 28,620

3.

Revised Units= 6,100 Units

Sales Value = 6,100 Units * $ 31

Variable Cost = 6,100 Units * $ 19

Hence the correct answer is $ 17,700

Total Per Unit Sales (7,190 units) $ 2,22,890 $ 31 Less :Variable expenses 1,36,610 19 Contribution margin 86,280 $ 12 Less :Fixed expenses 55,500 Net operating income $ 30,780

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