10 Questions
What is the new total contribution margin if Whirly Corporation's sales volume increases by 100 units?
$151,500
What is the new net operating income if Whirly Corporation's sales volume decreases by 100 units?
$13,500
At what sales volume does Karlik Enterprises break even?
4,000 units
What is the contribution margin ratio for Holiday Creations, Inc.?
40%
If Holiday Creations, Inc. increases its total sales by $1,000, what will be the change in net operating income?
$400
If Hermann Corporation increases its monthly advertising budget by $5,000 and increases sales by $9,000, what happens to the net operating income?
Net operating income increases by $1,700
What is the net operating income if Whirly Corporation’s sales volume is 9,000 units?
$10,000
What is the additional monthly contribution margin if Hermann Corporation uses higher-quality components and increases sales by 10%?
$6,270
What is the variable cost per unit for Jaffre Enterprises?
$11
Given the selling price and variable expense per unit, what is Karlik Enterprises' contribution margin per unit?
$6
Study Notes
Contribution Format Income Statement
- Whirly Corporation's income statement has sales of $350,000, variable expenses of $200,000, contribution margin of $150,000, and fixed expenses of $135,000, resulting in a net operating income of $15,000.
- The company's sales volume is 10,000 units, with a selling price of $35 per unit and variable expenses of $20 per unit.
Cost-Volume-Profit (CVP) Graph
- Karlik Enterprises distributes a single product with a selling price of $24 and variable expense of $18 per unit.
- The company's monthly fixed expense is $24,000.
- The CVP graph is used to estimate the break-even point in unit sales.
Profit Graph
- Jaffre Enterprises distributes a single product with a selling price of $16 and variable expense of $11 per unit.
- The company's fixed expense is $16,000 per month.
- The profit graph is used to estimate the break-even point in unit sales.
Computing and Using the CM Ratio
- Holiday Creations, Inc. has a total sales of $200,000, total variable expenses of $120,000, and fixed expenses of $65,000 when selling 50,000 units.
- The contribution margin (CM) ratio is used to estimate the change in net operating income due to changes in sales.
Changes in Variable Costs, Fixed Costs, Selling Price, and Volume
- Hermann Corporation has a selling price of $90, variable expenses of $63, and contribution margin of $27 per unit.
- Fixed expenses are $30,000 per month, and the company sells 2,000 units per month.
- The company can evaluate the effect of changes in advertising budget and variable costs on sales and profit.
Prepare a Contribution Format Income Statement for Whirly Corporation based on the given data. Calculate sales, variable expenses, contribution margin, and fixed expenses.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
