Ofarrell Corporation, a company that produces and sells a single product, has provided its contribution format income statement for March. If the company sells 5,400 units, its net operating income should be closest to:
A)$19,008
B)$17,600
C)$24,000
D)$34,000

Question

Ofarrell Corporation, a company that produces and sells a single product, has provided its contribution format income statement for March.  If the company sells 5,400 units, its net operating income should be closest to:
A)$19,008 
B)$17,600 
C)$24,000 
D)$34,000

Quizplus · Accepted Answer

Using the contribution margin per unit of $12.00, we can calculate the total contribution margin as 5,400 units sold x $12.00 per unit = $64,800.

To calculate net operating income, we need to subtract fixed expenses of $40,800 from the total contribution margin: 
$64,800 - $40,800 = $24,000.

Therefore, the net operating income should be closest to option C, $24,000.

Ofarrell Corporation, a Company That Produces and Sells a Single