Answered: slo Company prepared the following…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter2: Basic Managerial Accounting Concepts

Section: Chapter Questions

Problem 14MCQ: Use the following information for Multiple-Choice Questions 2-13 through 2-18: Last year, Barnard...

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Question

Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):


Sales	$	20,000
Variable expenses		13,000
Contribution margin		7,000
Fixed expenses		3,780
Net operating income	$	3,220

Questions:

A) If the variable cost per unit increases by $1, spending on advertising increases by $1,100, and unit sales increase by 120 units, what would be the net operating income?

B) What is the break-even point in unit sales?

C) What is the break-even point in dollar sales?

Required information
[The following information applies to the questions displayed below.]
Oslo Company prepared the following contribution format income statement based on a sales volume of
1,000 units (the relevant range of production is 500 units to 1,500 units):
Sales
Variable expenses
Contribution margin
Fixed expenses
$20,000
13,000
7,000
3,780
Net operating income $ 3,220

Expert Solution

Step 1 Introduction

The break even sales units are calculated as fixed cost divided by Contribution margin per unit.

Break even sales dollars is calculated as fixed cost divided by contribution margin ratio.

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