Lister Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (3,000 units) $ 90,000 Variable expenses 58,500 Contribution margin 31,500 Fixed expenses 21,000 Net operating income $ 10,500 If sales increase to 3,040 units, the increase in net operating income would be closest to: (Round your intermediate calculations to 2 decimal places.)

(A) $420.00

(B) $140.00

(C) $1,200.00

(D) $780.00

(A) $420.00

Explanation:

We know that,

The net income = Sales - variable cost - fixed expense

Since, the sales units are increased by 40 units, so new sales units is 3,040 units

So, the sale per unit equals to

= Total sales : number of units

= $90,000 : 3,000 units

= $30

So, the new sales

= Sales units * selling price per unit

= $3,040 * $30 = $91,200

The variable cost = Sales units * variable cost per unit

where,

Variable cost per unit = Total variable cost : number of units

= $58,500 : 3,000 units

= $19.5

So, the new variable cost equals to

= 3,040 units * $19.5

= $59,280

And the fixed expense would remain the same

So, the net income would be equal to

= $91,200 - $59,280 - $21,-00

= $10,920

The net income given is $10,500

So, the difference equals to

= $10,920 - $10,500

= $420