Sjostrom Corporation has provided the following contribution format income state

Question

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

If the variable cost per unit increases by $10, spending on advertising increases by $1,500, and unit sales increase by 15,800 units, the net operating income would be closest to:

Multiple Choice

$91,200

$12,500

$114,100

$5,700

Sales (7,000 units) $ 280,000 Variable expenses 182,000 Contribution margin 98,000 Fixed expenses 84,000 Net operating income $ 14,000

Explanation / Answer

Sales price/unit=(280,000/7000)=$40

Variable cost/unit=(182000/7000)=$26

Sales(7000+15800)*40 $912000 Variable expenses(7000+15800)*(26+10) $820800 Contribution margin $91200 Fixed expenses(84000+1500) 85500 Net operating income $5700.

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