Dimitrov Corporation, a company that produces and sells a single product, has provided its contribution format income statement for July.
Sales (6,500 units) 442,000
Variable expenses 312,000
Contribution margin 130,000
Fixed expenses 103,500
Net operating income 26,500
If the company sells 6,400 units, its net operating income should be closest to:
a) $25,979
b) $22,000
c) $26,500
d) $24,500

d) $24,500

Explanation:

At an operating volume of 6,500 units, if the total contribution margin is $130,000, the contribution margin per unit is:

Net operating income is given by the total contribution margin minus fixed expenses. If fixed expenses are $103,500, for an operating volume of 6,400 units, net operating income is:

If the company sells 6,400 units, its net operating income is $24,500.

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