Answer:
5(a) $1,156,000
5(b) -$104,000
Explanation:
5(a)
The reduced selling price
= [tex]120-13.2[/tex]
= [tex]106.80[/tex]
The revised fixed cost
= [tex]180000+68000[/tex]
= [tex]248000[/tex]
The revised number of sales unit
= [tex]24000\times 125 \ percent[/tex]
= [tex]30000 \ units[/tex]
Now,
The computation of net operating income will be:
Sales
= [tex]30000\times 106.8[/tex]
= [tex]3,204,000[/tex] ($)
Variable costs (less)
= [tex]30000\times 60[/tex]
= [tex]1,800,000[/tex] ($)
Contribution margin
= [tex]Sales-Variable \ cost[/tex]
= [tex]1,404,000[/tex] ($)
Fixed costs (less)
= [tex]248,000[/tex] ($)
Net operating income
= [tex]Contribution \ Margin -Fixed \ cost[/tex]
= [tex]1,156,000[/tex] ($)
5(b)
The net operating will decrease over last year will be:
= [tex]1,156,000-1,260,000[/tex]
= [tex]-104,000[/tex] ($)
