If these results of the company occur, the net operating income will become $26,000.
What is the net operating income?
The net operating income is the difference between sales revenue and variable and fixed costs.
Data and Calculations:
Current sales = $300,000
Fixed expenses $85,000
Contribution margin ratio = 30%
Variable expenses ratio = 70% (100% - 30%)
Expected sales = $370,000
Expected variable expenses = $259,000 ($370,000 x 70%)
Contribution margin = $111,000 ($370,000 - $259,000)
Fixed expenses = $85,000
Net operating income = $26,000 ($111,000 - $85,000)
Thus, if these results of the company occur, the net operating income will become $26,000.
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