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13 March, 09:08

LLC 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

Required: If sales decline to 2,600 units enter the resulting net operating income in the box below

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  1. 13 March, 11:15
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    Net operating income = $6,300

    Explanation:

    Given:

    At 3,000 unit production:

    Sales = $90,000

    Variable expenses = $58,500

    Fixed expenses = $21,000

    Net operating income $ 10,500

    Computation:

    Selling price for 2,600 units = (Sales / Number of units sold) 2,600

    Selling price for 2,600 units = ($90,000 / 3,000) 2,600

    Selling price for 2,600 units = $78,000

    Variable cost for 2,600 units = (Variable expenses / Number of units sold) 2,600

    Variable cost for 2,600 units = ($58,500 / 3,000) 2,600

    Variable cost for 2,600 units = $50,700

    Net operating income = Selling price for 2,600 units - Variable cost for 2,600 units - Fixed expenses

    Net operating income = $78,000 - $50,700 - $21,000

    Net operating income = $6,300
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