Dimitrov Corporation, a company that produces and sells a single product, has provided its contribution format income statement for July. If the company sells 6,900 units, its net operating income should be closest to:

Question

Dimitrov Corporation, a company that produces and sells a single product, has provided its contribution format income statement for July.  If the company sells 6,900 units, its net operating income should be closest to:

Quizplus · Accepted Answer

To calculate the net operating income for a particular number of units sold, we need to use the contribution margin ratio.

Contribution margin ratio = Total contribution margin / Total sales

From the given contribution format income statement, we can calculate the contribution margin ratio:

Contribution margin ratio = (177,600 + 35,100) / 330,000 = 0.6

Using the contribution margin ratio, we can calculate the total contribution margin for 6,900 units:

Total contribution margin = 6,900 units x $60 per unit x 0.6 = $224,400

Now we can calculate the net operating income:

Net operating income = Total contribution margin - Total fixed expenses

= $224,400 - $189,900

= $34,500

Therefore, the closest option is B) $34,500.

Dimitrov Corporation, a Company That Produces and Sells a Single