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2 February, 11:35

Lister Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (3,000 units) $ 90,000 Variable expenses 58,500 Contribution margin 31,500 Fixed expenses 21,000 Net operating income $ 10,500 If sales increase to 3,040 units, the increase in net operating income would be closest to: (Round your intermediate calculations to 2 decimal places.)

(A) $420.00

(B) $140.00

(C) $1,200.00

(D) $780.00

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  1. 2 February, 12:26
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    (A) $420.00

    Explanation:

    We know that,

    The net income = Sales - variable cost - fixed expense

    Since, the sales units are increased by 40 units, so new sales units is 3,040 units

    So, the sale per unit equals to

    = Total sales : number of units

    = $90,000 : 3,000 units

    = $30

    So, the new sales

    = Sales units * selling price per unit

    = $3,040 * $30 = $91,200

    The variable cost = Sales units * variable cost per unit

    where,

    Variable cost per unit = Total variable cost : number of units

    = $58,500 : 3,000 units

    = $19.5

    So, the new variable cost equals to

    = 3,040 units * $19.5

    = $59,280

    And the fixed expense would remain the same

    So, the net income would be equal to

    = $91,200 - $59,280 - $21,-00

    = $10,920

    The net income given is $10,500

    So, the difference equals to

    = $10,920 - $10,500

    = $420
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