Ofarrell Corporation, a company that produces and sells a single product, has provided its contribution format income statement for March. If the company sells 5, 400 units, its net operating income should be closest to:

Question

Ofarrell Corporation, a company that produces and sells a single product, has provided its contribution format income statement for March.  If the company sells 5, 400 units, its net operating income should be closest to:

Quizplus · Accepted Answer

Selling price per unit = Sales ÷ Quantity sold
= $205, 000 ÷ 5, 000 units = $41 per unit
Variable expenses per unit = Variable expenses ÷ Quantity sold
= $125, 000 ÷ 5, 000 units = $25 per unit
Unit CM = Selling price per unit - Variable expenses per unit
= $41 per unit - $25 per unit = $16 per unit
Profit = (Unit CM × Q)- Fixed expenses
= ($16 per unit × 5, 400 units)- $62, 400 = $86, 400 - $62, 400 = $24, 000

Ofarrell Corporation, a Company That Produces and Sells a Single