Oslo Company prepared the following contribution format income statement based o
ID: 2400208 • Letter: O
Question
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):
Sales
$
25,700
Variable expenses
13,900
Contribution margin
11,800
Fixed expenses
7,788
Net operating income
$
4,012
3. What is the variable expense ratio? Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).
Variable 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.)
Net operating Income-
6. If the selling price increases by $1.60 per unit and the sales volume decreases by 100 units, what would be the net operating income? (Do not round intermediate calculations.)
Net operating Income-
7. If the variable cost per unit increases by $.60, spending on advertising increases by $1,100, and unit sales increase by 250 units, what would be the net operating income? (Do not round intermediate calculations.)
Net operating Income-
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):
Explanation / Answer
What is the variable expense ratio?
=Variable Cost Per units/Sales
=13.90/25.70
=54.09%
If sales increase to 1,001 units, what would be the increase in net operating income?
Contribution =1001*11.80=11811.80
Net Operating Income =Contribution - Fixed Cost =11811.80-7788 =4023.80
If sales decline to 900 units, what would be the net operating income?
Contribution =900*11.80=10620
Net Operating Income =Contribution - Fixed Cost =10620-7788 =2832
6. If the selling price increases by $1.60 per unit and the sales volume decreases by 100 units, what would be the net operating income?
Contribution =900*(11.80+1.60)=12060
Net Operating Income =Contribution - Fixed Cost =12060-7788 =4272
7. If the variable cost per unit increases by $.60, spending on advertising increases by $1,100, and unit sales increase by 250 units, what would be the net operating income?
Contribution =1250*(11.80-.60)=14000
Net Operating Income =Contribution - Fixed Cost =12060-(7788+1100) =5112
Amount Per unit Sales 25700 25.7 Variable expenses 13900 13.9 Contribution margin 11800 11.8 Fixed expenses 7788 7.788 Net operating income 4012 4.012