Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November. If the company sells 5,300 units, its net operating income should be closest to: Select one: a. $24,600 b. $2,200 c. $22,874 d. $15,400 Previous page

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

sales (5,700 units) $ 319,200

Variable expenses 188,100

Contribution margin 131,100

Fixed expenses 106,500

Net operating income $ 24,600

If the company sells 5,300 units, its net operating income should be closest to:

a. $24,600

b. $2,200

c. $22,874

d. $15,400

The correct answer is:

$15,400 (d.)

Explanation:

In order to solve this, we have to find the unit sales for the product, then use that to calculate for the required 5,300 units. This is done as follows:

we are given that:

5,700 units = 319,200

∴ 1 unit = 319,200 : 5,700 = $56

∴ sales = $56 per unit

Hence 5,300 units = 56 * 5300 = $296,800

For the variable expenses:

5,700 units = $188,100

∴ 1 unit = 188,100 : 5700 = $33

∴ 5,300 units = 33 * 5300 = $174,900

Fixed expenses = $106,500 (remains the same irrespective of number of units)

Now let us calculate the net operating income as follows:

Net operating income = Sales - variable expenses - fixed expenses

Net operating income = 296,800 - 174,900 - 106,500 = $15,400

Therefore if 5,300 units are sold, net operating income = $15,400