If sales decline to 900 units, what would be the net operating income? (Do not r

Question

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

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.)

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.)

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

[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 $20,300 12,100 Contribution margin Fixed expenses 8,200 6,232 Net operating income $ 1,968

Explanation / Answer

Sale Value for 1000 units $20300

Selling price per unit 20300/1000 = $20.30

Variable cost for 1000 units $12100

Variable cost per unit 12100/1000 = $12.10

1) If sales decline to 900 units

Sale value for 900 units 900*20.30 = $18270

Variable Expenses 900*12.10 = $10890

Contribution margin $ 7380

Fixed Expenses $ 6232

Net Operating Income $ 1148

2.If selling price increased by $2.10 and Sales Volume decreases by 100 units

Revised selling price per unit $20.3+$2.10 = $22.40

Revised Sales Volume in units 1000-100 = 900

Revised Sale Value $22.40*900 = $20160

Variable expenses 900* 12.10= $ 10890

Contribution margin $9270

Fixed expenses $6232  

Net Operating Income $3038

3. f the variable cost per unit increases by $1.10, spending on advertising increases by $1,600, and unit sales increase by 250 units

Revised Sale quantity 1000+250=1250

Revised variable cost per unit $12.10+$1.10=$13.20

Revised sale value 1250 *20.30= $25375

Revised Variable Expenses 1250*13.20= $16500

Contribution Margin $8875

Revised Fixed expenses $6232+$1600(Advt Exps) $7832

Net Operating income $ 1043

4. Break even point in unit sales

Break even point in unit sales = Fixed expenses/ Contribution per unit

Contribution per unit = Selling price per unit - Variable cost per unit

$20.30 - $12.10 = $8.20

Fixed Expenses $ 6232

Break Even point in unit sales = $6232/ $8.20 = 760 units

To cross check

Sale Value of 760 units 760* $20.30 = $15428

Variable Expenses 760* $ 12.10 = $9196

Contribution Margin $6232

Fixed Expenses $ 6232   

Net Operating income 0

Break even point is that point at which there are no profit or loss and the contribution margin covers the fixed expenses   

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