Compute the company new net operating income

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Cost Volume Profit Analysis

Voltar Company manufacturers and sells a specialized cordless telephone for high electromagnetic radiation environments. The company's contribution format income statement for the most recent year is given below:

 

Total

Per Unit

Sales (20,000 units)

$1,200,000

$60

Variable expenses

$900,000

$45

Contribution margin

$300,000

$15

Fixed expenses

$240,000

 

Net operating income

$60,000

 

In an effort to increase sales and profits, management is considering the use of a higher-quality speaker. The higher-quality speaker would increase variable costs by $3 per unit, but management could eliminate one quality inspector who is paid a salary of $30,000 per year. The sales manager estimates that the higher-quality speaker would increase annual sales by at least 20%. Compute the company's new net operating income.

Reference no: EM131806677

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