Wright Corporation's contribution format income statement for last month appears below.There were no beginning or ending inventories. The company produced and sold 3,000 units during the month.
-If sales decrease by 500 units by next month,by how much would fixed expenses have to be reduced to maintain the current net operating income?

Question

Quizplus · Accepted Answer

Selling price per unit = $45,000 F1F1F1S1F1F1F10 3,000 units = $15 per unit
Variable expense per unit = $27,000 F1F1F1S1F1F1F10 3,000 units = $9 per unit
Unit CM = Selling price per unit - Variable expense per unit = $15 per unit - $9 per unit = $6 per unit
Profit = Unit CM F1F1F1S1F1F1F10 Q - Fixed expenses
$6,000 = $6 per unit F1F1F1S1F1F1F10 (3,000 units - 500 units)- Fixed expenses
$6,000 = $6 per unit F1F1F1S1F1F1F10 2,500 units - Fixed expenses
$6,000 = $15,000 - Fixed expenses
Fixed expenses = $15,000 - $6,000 = $9,000
Fixed expenses would have to be reduced from $12,000 to $9,000,a reduction of $3,000.

Wright Corporation's Contribution Format Income Statement for Last Month Appears