Remmel Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (6,000 units) $ 300,000 Variable expenses 240,000 Contribution margin 60,000 Fixed expenses 59,000 Net operating income $ 1,000 If the selling price increases by $3 per unit and the sales volume decreases by 400 units, the net operating income would be closest to:

(A) $19,000

(B) $16,800

(C) $13,800

(D) $17,733

The correct answer is C: $13,800

Explanation:

Giving the following information:

Sales (6,000 units) $ 300,000

Variable expenses 240,000

Contribution margin 60,000

Fixed expenses 59,000

Net operating income $ 1,000

Selling price = (300000/6000) = $50

Unitary variable cost = 240000/6000 = $40

Unitary contribution margin = 10

Now:

Selling price = 53

Q = 5600

Unitary contribution margin = 10 + 3 = 13

Net operating income:

Contribution margin = 5400*13=$72,800

Fixed expense = 59000

Net operating income = 13800