Tuesday, July 5, 2016

Wheeler Corporation's most recent income statement follows: Total Per Unit Sales (7,500 units) $ 201,000 $ 26.80 ...

If the only change is that sales volume goes up by 40 units from 7500 to 7540, then the per-unit figures won't change, and we only need to worry about the total sales, total expenses, total contribution margin and net operating income.

Since the per-unit revenue is $26.80 and we've sold 7540 units, our new total revenue is $202,072.

Since the per-unit variable expenses are $17.20, our total variable expenses are $129,688.

This means our total contribution margin is $72,384. (You can check that this is equal to the per-unit contribution $9.60 times 7540 units.)

Our fixed expenses are of course fixed at $54,100, so that leaves our net operating income, which is the contribution margin minus the fixed expenses, and therefore our net operating income is $18,284.

Putting it all together gives us our income statement:

 Total Per Unit   Sales (7,540 units) $ 202,072   $ 26.80     Variable expenses   129,688     17.20       Contribution margin   72,384    $ 9.60     Fixed expenses   54,100             Net operating income  $ 18,284

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