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. If the selling price increases by $2.10 per unit and the sales volume decreases by 100 units, what would be the net operating income? (Do not round intermediate calculations.) Net operating income _______

2. If the variable cost per unit increases by $1.10, spending on advertising increases by $1,600, and unit sales increase by 250 units, what would be the net operating income? (Do not round intermediate calculations.) Net operating income ____________

3. What is the break-even point in unit sales? (Do not round intermediate calculations.) Break even point __________ units

4. What is the break-even point in dollar sales? (Round intermediate calculations to 4 decimal places. Round your final answer to the nearest dollar amount.) Break even point _________

5. How many units must be sold to achieve a target profit of $5,084? (Do not round intermediate calculations.) Number of units __________

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. Net operating income = $ 3,038.00

Note :

2.Net operating income = $ 1,043.00

Note :

3. The break-even point in unit sales= Fixed Cost / Contribution Margin Per Unit

= $ 6,232 / $ 8.20

= 760 Units

4. break-even point in dollar sales = Fixed Cost / Contribution Margin Ratio

= $ 6,232 /40.3941%

= $ 15,428

Note :

Contribution Margin Ratio = Contribution Margin / Sales *100

= $ 8,200 / 20,300 *100

= 40.3941

5. TargetProfit = $ 5,084

Fixed Cost = $ 6,232

Contribution Margin Required = Target Profit + Fixed Cost

= $ 11,316

Contribution Margin Per Unit = $ 8.20

Hence Units = Contribution Margin Required / Contribution Margin Per Unit

= $ 11,316 / $ 8.20

= 1,380 Units

1,000 Units Per Unit(Total /,1000 Units) Revised Per Unit 900 Units Volume 900 Sales $ 20,300 20.3 22.40 20160 Variable expenses 12,100 12.1 12.1 10890 Contribution margin 8,200 8.2 10.30 9,270 Fixed expenses 6,232 6232 Net operating income $ 1,968 3,038.00

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