Thomason corporation has provided the following contribution format income statement. assume that the following information is within the relevant range. sales (1,000 units) $ 40,000 variable expenses 30,000 contribution margin 10,000 fixed expenses 7,000 net operating income $ 3,000 if the variable cost per unit increases by $1, spending on advertising increases by $2,000, and unit sales increase by 50 units, the net operating income would be closest to

$450

Explanation:  Net operating income is the income a company has left with after deducting for fixed and variable expenses. It is also denoted as EBIT, Earnings before interest and tax.

EBIT = sales - ( variable expenses + fixed expenses )

now,

sales = $40 * (1000 + 50 )units = $42000

variable expense = ($30 + $1)*(1050 units) = $32,550

fixed expenses = $7000 + $2000 = $9000

therefore,

EBIT =  $42000 - ($32,550 +  $9000) = $450

The net operating income would be closest to $450.

Explanation:

VARIABLE EXPENSES = $30,000

we know the total number of units - 1000, so therefore we can take out the

VARIABLE COST PER UNIT = $30,000 / 1000

                                              = $30

SALES     = $40,000

we know the total number of units - 1000, so therefore we can take out the

SALES PER UNIT = $40

And we have been told that the variable expenses have been increased bu $1 and total number of units have also increased by 50 units, so with this information we can take out new variable expenses and total sales,

TOTAL SALES(NEW) = 1050 X 40

                                  = $42,000

NEW VARIABLE EXPENSES = 1050 X $31

                                               = $32,550

And also the fixed expenses have increased by $2000 (advertising expenses ) , so

FIXED COST = $7000 + $2000

                      = $9000

Now we calculate the net operating income,

SALES   = $42,000

(-) VARIABLE EXPENSES = $32,550

(-) FIXED COST               = $9000

NET OPERATING INCOME = $450

what

explanation:

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