Asked by Gavin VandenTop on Jun 28, 2024
Verified
Decaprio Inc.produces and sells a single product.The company has provided its contribution format income statement for June. If the company sells 9,200 units, its net operating income should be closest to:
A) $27,077
B) $49,900
C) $36,700
D) $25,900
Contribution Format
An income statement layout that segregates fixed costs from variable costs, thus highlighting the contribution margin.
Net Operating Income
The total profit of a company after operating expenses are subtracted from gross profit but before taxes and interest costs are deducted.
Sold Units
The total number of units of a product that have been sold within a specific time period.
- Identify the effects of variations in sales, variable costs, and fixed overheads on an organization's financial outcomes.
- Determine the effect that variations in sales volume have on net operating income.
Verified Answer
Contribution margin per unit = Sales price per unit - Variable expenses per unit
= $80 - $33
= $47
Total contribution margin at 9,200 units = $47 x 9,200 = $432,400
Net operating income = Total contribution margin - Fixed expenses
= $432,400 - $395,700
= $36,700
Therefore, the closest net operating income to 9,200 units sold is $36,700, which is option C.
= $528,000 ÷ 8,800 units = $60 per unit
Variable expenses per unit = Variable expenses ÷ Quantity sold
= $290,400 ÷ 8,800 units = $33 per unit
Unit CM = Selling price per unit - Variable expenses per unit
= $60 per unit - $33 per unit = $27 per unit
Profit = (Unit CM × Q)- Fixed expenses
= ($27 per unit × 9,200 units)- $211,700 = $248,400 - $211,700 = $36,700
Learning Objectives
- Identify the effects of variations in sales, variable costs, and fixed overheads on an organization's financial outcomes.
- Determine the effect that variations in sales volume have on net operating income.
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