Decaprio Inc. produces and sells a single product. The company has provided its contribution format income statement for June. If the company sells 9,200 units, its net operating income should be closest to:

Question

Decaprio Inc. produces and sells a single product. The company has provided its contribution format income statement for June.  If the company sells 9,200 units, its net operating income should be closest to:

Quizplus · Accepted Answer

Selling price per unit = Sales ÷ Quantity sold
= $528,000 ÷ 8,800 units = $60 per unit
Variable expenses per unit = Variable expenses ÷ Quantity sold
= $290,400 ÷ 8,800 units = $33 per unit
Unit CM = Selling price per unit - Variable expenses per unit
= $60 per unit - $33 per unit = $27 per unit
Profit = (Unit CM × Q) - Fixed expenses
= ($27 per unit × 9,200 units) - $211,700 = $248,400 - $211,700 = $36,700