Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):

Sales$15,000Variable expenses9,000Contribution margin6,000Fixed expenses3,120Net operating income$2,880

5. If sales decline to 900 units, what would be the net operating income?

Answered by Expert Tutors

Net operating income is $2,280.

Step-by-step explanation

Sales price = $15,000 1000 = $15

Variable cost = $9,000 1000 = $9

Net operating income is computed using the equation given below:

Net operating income = Sales - Variable cost - Fixed cost

= {900 $15} - {900 $9} - $3,120

= $13,500 - $8,100 - $3,120

= $2,280.