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.