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3 October, 18:03

Dimitrov Corporation, a company that produces and sells a single product, has provided its contribution format income statement for July.

Sales (6,800 units) $401,200

Variable expenses 265,200

Contribution margin 136,000

Fixed expenses 103,500

Net operating income $32,500

If the company sells 6,700 units, its net operating income should be closest to:

a. $31,979

b. $32,500

c. $28,000

d. $30,500

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Answers (1)
  1. 3 October, 18:30
    0
    Option (d) is correct.

    Explanation:

    Contribution margin per unit:

    = Contribution margin : No. of units sold

    = 136,000 : 6,800

    = $20 per unit

    If the company sells 6,700 units, then

    Net operating income:

    = Contribution margin - Fixed expenses

    = (6,700 units * $20 per unit) - $103,500

    = $134,000 - $103,500

    = $30,500

    Therefore, the net operating income of this company is closest to $30,500.
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