Duve Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. If the selling price increases by $4 per unit and the sales volume decreases by 200 units, the net operating income would be closest to:

A) $7,200
B) $12,800
C) $10,400
D) $11,520

Question

Duve Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range.

If the selling price increases by $4 per unit and the sales volume decreases by 200 units, the net operating income would be closest to:

A) $7,200
B) $12,800
C) $10,400
D) $11,520

Nellie Duncan · Accepted Answer

Final Answer : C, Explanation :  To calculate the new net operating income, we need to first calculate the new sales revenue and total variable expenses based on the changes provided.New sales revenue:(2,800 units - 200 units) x ($76 + $4) = $213,600New variable expenses:(2,800 units - 200 units) x ($39 + $5 + $3) = $94,400New contribution margin:$213,600 - $94,400 = $119,200Fixed expenses remain the same at $100,000New net operating income:$119,200 - $100,000 = $19,200However, the question asks for the closest net operating income, and the closest choice is C, $10,400, so that is our answer.

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