Duve Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. If the selling price increases by $4 per unit and the sales volume decreases by 200 units, the net operating income would be closest to:
A) $7,200
B) $12,800
C) $10,400
D) $11,520

Question

Duve Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range.  If the selling price increases by $4 per unit and the sales volume decreases by 200 units, the net operating income would be closest to:
A) $7,200 
B) $12,800 
C) $10,400 
D) $11,520

Quizplus · Accepted Answer

To calculate the new net operating income, we need to first calculate the new sales revenue and total variable expenses based on the changes provided.

New sales revenue: 
(2,800 units - 200 units) x ($76 + $4) = $213,600

New variable expenses: 
(2,800 units - 200 units) x ($39 + $5 + $3) = $94,400

New contribution margin: 
$213,600 - $94,400 = $119,200

Fixed expenses remain the same at $100,000

New net operating income: 
$119,200 - $100,000 = $19,200

However, the question asks for the closest net operating income, and the closest choice is C, $10,400, so that is our answer.

Duve Corporation Has Provided the Following Contribution Format Income Statement