Required information The following information applies to the questions displaye
ID: 2407711 • Letter: R
Question
Required information 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): 95,000 Sales Variable expenses Contribution margin Fixed expenses Net operating income 38,000 31,920 $ 6,080 Required 1. What is the contribution margin per unit? (Round your answer to 2 decimal places.) Contribution margin per unit38.00Explanation / Answer
1) computation of contribution margin ratio:-
Contribution margin ratio = (sales-variable expenses)/sales
Contribution margin ratio = (95,000-57,000)/95,000
Contribution margin ratio = 38,000/95,000
Contribution margin ratio = 40%
2) computation of variable expense ratio:-
Variable expense ratio = variable expenses/ sales
Variable expense ratio = 57,000/95,000
Variable expense ratio = 60%
3) Computation of increase in net operating income:-
Sales value ( 1,001*95)- note-1 = 95,095
Variable expense (95,095*60%). = (57,057)
Contribution margin. = 38,038
Fixed expenses. = (31,920)
Net operating income. = 6,118
Therefore, increase in Net operating income = $ 38 ( 6118-6080)
4) Computation of net operating income if sales declined to 900 units:-
Sales(900*95)- note-1. = 85,500
Variable expenses( 85,500*60%) = (51,300)
Contribution margin. = 34,200
Fixed expenses = (31,920)
Net operating income = 2,280
Note:-1 computation of sales per unit:-
Sales per unit = sales value/ no. Of units
Sales per unit = 95,000/1000 = 95
5) computation of net operating income for 900 units at $97
Sales (900*97). = 87,300
Variable expenses (87,300*60%) = (52,380)
Contribution margin = 34,920
Fixed expenses. = (31,920)
Net operating income. =. 3,000
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