Suppose the price remains the same. The best estimate of the NOI in july at the

Question

Suppose the price remains the same. The best estimate of the NOI in july at the sales volume of 6,400 units: (please provide deatils and explanation)

Egret Corporation is a wholesaler that sells a single product and maintains a stable cost structure. Management has provided the following data for two months. 6 7.0 May Sales revenue Gross margin Net operating income (Loss) Selling price per unit June $ 925,000 S 1,295,000 S 474,700 S 794,700 (141,300) S 162,700 185 185 $ Suppose the price remains the same. The best estimate of the net operating income (loss) in July at the sales volume(ueits below is: Sales volume in July: Sales volume in July: 6,400) u /6,400) units.- S-( . IYy Ou0 ( -S 180,864 B. S 51,700 71,500 $ 90,700 N I lo, 00 A E. Zero 202, SUO

Explanation / Answer

Answer: C - $71500

Working Notes:

Using High and Low method:

a) Variable operating expenses = (difference in operating expenses) /( Difference in volume of sales) = $16000 / 2000 units = $8 / unit

b) Fixed operating expense = $616000 - 5000 x $8 = $576000

c) Variable cost of goods sold = (difference in cost of goods sold) / (difference in volume of sales) = $50000 / 2000 units = $50/unit

d) Fixed Cost of goods sold = $450300 - 5000x$25 = $325300

Statement of estimated income for July Number of units sold 6400 Sales revenue ($185 x 6400) 1184000 less: cost of goods sold ($) Variable cost of goods sold ($25 x 6400) 160000 Fixed cost of goods sold 325300 485300 Gross margin ($) 698700 Less: operating expenses ($) : Variable operating expenses (6400 x $8) 51200 Fixed operating expenses 576000 627200 Operating Income ($) 71500

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