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

To calculate the net operating income at 9,200 units, we can use the contribution margin per unit and the fixed expenses.

Contribution margin per unit = Sales price per unit - Variable expenses per unit 
= $80 - $33 
= $47

Total contribution margin at 9,200 units = $47 x 9,200 = $432,400

Net operating income = Total contribution margin - Fixed expenses 
= $432,400 - $395,700 
= $36,700

Therefore, the closest net operating income to 9,200 units sold is $36,700, which is option C. 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