Whirly Corporation’s contribution format income statement for the most recent month is shown below: Total Per Unit Sales (7,200 units) $ 237,600 $ 33.00 Variable expenses 136,800 19.00 Contribution margin 100,800 $ 14.00 Fixed expenses 54,900 Net operating income $ 45,900 Required: (Consider each case independently): 1. What would be the revised net operating income per month if the sales volume increases by 40 units? 2. What would be the revised net operating income per month if the sales volume decreases by 40 units? 3. What would be the revised net operating income per month if the sales volume is 6,200 units?

The revised net operating income per month if the sales volume is 6,200 units   $31,900.Hence we can say that if the company sells 6,200 units, the company can still make a profit.

Explanation:

1 ) What would be the revised net operating income per month if the sales volume increases by 40 units?

The revised /New sales volume after increasing 40 units = (7,200 + 40) = 7,240 units.

The revised net operating income is calculated as follows

                         Whirly Corporation’s

             Contribution format income statement

             For the year ended December 31 20YY

Sales Revenue (7,240 × 33) = $ 237,600 (equation  - 1)

Less: Variable expense (7,240 × 19) = 136,800 (equation - 2)

Contribution Margin = $100,800

Less: Fixed Expense = $54,900

Net Operating Income $45,900

equation  1: Sale price per unit $237,600 ÷ 7,200 = $35

equation 2: Variable expense per unit $136,800 ÷ 7,200 = $20

2) What would be the revised net operating income per month if the sales volume decreases by 40 unit

From the question 1 we know that

Sale price per unit = $33

Variable expense per unit = $19

New sales volume after decreasing 40 units = (7,200 - 40) = 7,160 units.

The revised net operating income is calculated as follows

                          Whirly Corporation’s

             Contribution format income statement

             For the year ended December 31 20YY

Sales Revenue (7,160 × 33) = $236,280

Less: Variable expense (7,160 × 19) = $136,040

Contribution Margin = $100,240

Less: Fixed Expense  $54,900

Net Operating Income $45,340

3. What would be the revised net operating income per month if the sales volume is 6,200 units?

From the question 1 we get

Sale price per unit = $33

Variable expense per unit = $19

If the sales volume is 6,200 units, the revised net operating income is calculated as follows

                       Whirly Corporation’s

             Contribution format income statement

             For the year ended December 31 20YY

Sales Revenue (6,200 × 33) = $204,600

Less: Variable expense (6,200 × 19) = $117,800

Contribution Margin = $86,800

Less: Fixed Expense  $54,900

Net Operating Income           $31,900

Hence we can say that if the company sells 6,200 units, the company can still make a profit.

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