Oslo Company prepared the following contribution format income statement based o

Question

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)

1. What is the contribution margin per unit? (Round your answer to 2 decimal places.) contribution margin per unit ________

2. What is the contribution margin ratio? (Enter your answer as a percentage rounded to 2 decimal places (i.e., 0.13579 should be entered as 13.58).) Contribution margin ratio ___________%

3. What is the variable expense ratio? Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34). Variable expense ratio _________%

4. If sales increase to 1,001 units, what would be the increase in net operating income? (Round your answer to 2 decimal places.) Increase in net operating income _________

5. If sales decline to 900 units, what would be the net operating income? (Do not round intermediate calculations.) Net Operating Income ________

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)

Explanation / Answer

1. The contribution margin per unit=

= Contribution Margin / Total Units

= $ 8,200 / 1,000 Units

= $ 8.20

2. contribution margin ratio = contribution margin / Sales *100

= $ 8,200 / 20,300 *100

= 40.39%

3. variable expense ratio = variable expense / Sales *100

= $ 12,100 / $ 20,300 *100

= 59.61%

4.

Increase in net operating income = $ 1,976.20 - $ 1,968

= $ 8.20

Note :

5.

The Net Operating Income = $ 1,148.00

Note:

1,000 Units Per Unit(Total /,1000 Units) 1,001 Units( Per Unit *1,001) Increase Sales $ 20,300 20.3 20,320.30 Variable expenses 12,100 12.1 12,112.10 Contribution margin 8,200 8.2 8,208.20 Fixed expenses 6,232 6,232.00 Net operating income $ 1,968 1,976.20 8.20

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