Decaprio Inc. produces and sells a single product. The company has provided its contribution format income statement for June. Sales (8,800 units) $ 528,000 Variable expenses 290,400 Contribution margin 237,600 Fixed expenses 211,700 Net operating income $ 25,900 If the company sells 9,200 units, its net operating income should be closest to:

A. $49,900
B. $27,077
C. $36,700
D. $25,900

The correct answer is C.

Explanation:

Giving the following information:

Sales (8,800 units) $ 528,000

Variable expenses 290,400

Contribution margin 237,600

Fixed expenses 211,700

Net operating income $ 25,900

First, we need to determine the selling price and unitary variable cost:

Selling price= 528,000/8,800= $60

Unitary variable cost= 290,400/8,800= $33

Sales in units= 9,200

Sales=  9,200*60= 552,000

Variable cost= 9,200*33= (303,600)

Contribution margin= 248,400

Fixed costs= (211,700)

Net operatin income= 36,700

C. $36,700

Explanation:

Contribution format income statement for June.

Sales (8,800 units)       $528,000

Variable expenses       $290,400

Contribution margin    $237,600

Fixed expenses           $211,700

Net operating income $25,900

Selling Price = 528,000 / 8,800 = $60

Variable cost per unit = 290,400 / 8,800 = $33

As we known Selling price and Variable cost will change as the number of unit chages because these are variable in nature. Fixed cost is fixedehatever the units or output is.

Revised Contribution format income statement for June.

Sales (9,200 units x $60)                             $552,000

Variable expenses (9,200 units x $33)      ($303,600)

Contribution margin                                      $248,400

Fixed expenses                                            ($211,700)

Net operating income                                   $36,700

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