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a merchandiser plans to sell 14,400 units next month at a selling price of $110 per unit. it also gathered the following cost estimates for next month: cost cost formula cost of goods sold $60 per unit sold advertising expense $150,000 per month depreciation expense $70,000 per month shipping expense $100,000 per month $10 per unit sold administrative salaries $50,000 per month sales commissions 5% of sales insurance expense $15,000 per month what is the estimated net operating income for next month?

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Estimated Net operating income would be 1,11,800.

Selling price                                                               110              A

Less: Variable costs                                                

Cost of goods sold                                                    60

Shipping expense                                                      10

Commission at 5%                                                       5

Total Variable cost per unit                                       75             B

Contribution per unit                                               34.5            C (A-B)          

Units sold                                                                 14400          D

Estimated total contribution margin                    4,96,800    E (C*D)

Less: Fixed costs    

Advertising expense                                             150,000.00  

Depreciation expense                                            70,000.00  

Shipping expense                                                   100,000.00  

Administrative salaries                                              50,000.00  

Insurance expense                                                    15,000.00

Total Fixed cost                                                         385,000.00   F

Estimated net operating income                           111800            E-F

Total contribution margin- Product revenue - product variable costs / Product revenue So, if a company earned $250,000 from product sales with $100,000 in variable costs, the contribution margin would be: 250,000 - 100,000/250,000 =.60 or 60%.


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