IThe following information applies to the questions displayed below. Oslo Compan

ID: 2459814 • Letter: I

Question

IThe following information applies to the questions displayed below. Oslo Company prepared the folowing 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): Sales Variable expenses $20,900 2.300 Contribution margin Fixed expenses 8,600 6,708 Net operating income $ 1892 Required: 1. What is the contribution margin per unit? (Round your answer to 2 decimal places.) ntribution margin per unit 2. What is the contribution margin ratio? Round your percentage answer to 2 decimal places (i.e 1234 should be entered as 12.34) ntribution margin ratio 3. What is the variable expense ratio? Round your percentage answer to 2 decimal places (i.e.1234 should be entered as 12.34) riable expense ratio 4. If sales increase to 1,001 units, what would be the increase in net operating income? (Round your answer to 2 decimal places.) Increase in net operating income 5. If sales decline to 900 units, what would be the net operating income? (Do not round intermediate calculations.) toperating income

Explanation / Answer

Sales

20,900

Sales in Units

1,000

C=A/B

Sales Price

20.90

Variable Expenses

12,300

E=D/B

Variable cost per unit

12.30

F=C-E

Contribution per Unit

8.60

G=F/C%

Contribution Margin ratio

41.15%

H=E/S%

Variable Expense Ratio

58.85%

4. If Sales increase to 1,001 units net operating income will increase by the additional contribution

=1 x Contribution per Unit =1 x 8.60=$8.60

5. If Sales increase to 900 units net operating income will decrease by the additional contribution

= =1 x Contribution per Unit =100 x 8.60=$8,600

6.if the selling price increases by $2.30 per unit sales volume decreases

= [New Contribution per unit x New no of units]-Fixed cost

=[(20.9 +2.3 -12.30 x 900]-6,708

=$9,810-$6,708=$3,102

7. No of units=1,250

Selling Price=$20.90

Variable cost=$12.30 + $1.30=$13.60

New contribution=$20.90-$13.60=$7.30

Fixed cost=6,708+1,800=$8,508

= [New Contribution per unit x New no of units]-new Fixed cost

=7.3 x 1,250-$8,508

=$9125-$8,508=$617

8. Break even point in units= Fixed cost/ Contribution per unit=$6,708/8.6=780 units

9. Break even point in $=780 x 20.90=$16,302