What will be the change in net operating income

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Reference no: EM132802520

Southern studio manufactures pianos. In preparing for next year's operations, management has developed the following estimates:

                                                        Total                   Per Unit
Sales (20,000 units)                  $1,000,000        $50.00
Direct materials (variable)          200,000          10.00
Direct labor (variable)                50,000           2.50

Factory overhead:

Variable                                   70,000          3.50
Fixed                                     80,000            4.00

Selling and administrative:

Variable                                  100,000          5.0
Fixed                                       30,000          1.5

Problem 1: Compute the following items:

  1. Unit contribution margin.
  2. Contribution margin ratio.
  3. Break-even in sales dollars.

Problem 2: If the sales volume increases by 20% with no change in total fixed expenses, what will be the chaynge in net operating income?

Reference no: EM132802520

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