Question

Miller Company’s most recent contribution format income statement is shown below:

	Total	Per Unit
Sales (31,000 units)	$217,000	$7.00
Variable expenses	124,000	4.00
Contribution margin	93,000	$3.00
Fixed expenses	48,000
Net operating income	$ 45,000

Required:

Prepare a new contribution format income statement under each of the following conditions (consider each case independently): (Do not round intermediate calculations. Round your "Per unit" answers to 2 decimal places.)

   

1. The number of units sold increases by 10%.

2. The selling price decreases by $1.30 per unit, and the number of units sold increases by 17%.

3. The selling price increases by $1.30 per unit, fixed expenses increase by $7,000, and the number of units sold decreases by 8%.

4. The selling price increases by 10%, variable expenses increase by 30 cents per unit, and the number of units sold decreases by 6%.

     

Answer 1

1)
Miller Company Contribution income statement
	Total	Per unit
Sales	$ 238,700 (( 31,000 + 10% ) x $ 7)	$ 7
Less: Variable expenses	($ 136,400) (( 31,000 + 10% ) x $ 4)	($ 4)
Contribution margin	$ 102,300	$ 3
Less: Fixed expenses	($ 48,000)
Net operating income	$ 54,300
2)
Miller Company Contribution income statement
	Total	Per unit
Sales	$ 206,739 (( 31,000 (+) 17% ) x $ 5.7)	$ 5.70 ($ 7 (-) $ 1.30)
Less: Variable expenses	( $ 145,080) (( 31,000 (+) 17% ) x $ 4)	($ 4)
Contribution margin	$ 61,659	$ 1.70
Less: Fixed expenses	($ 48,000)
Net operating income	$ 13,659
3)
Miller Company Contribution income statement
	Total	Per unit
Sales	$ 236,716 (( 31,000 (-) 8% ) x $ 8.30 )	$ 8.30 ( $ 7 + $ 1.30)
Less: Variable expenses	( $ 114,080 ) (( 31,000 (-) 8% ) x $ 3 )	($ 4)
Contribution margin	$ 122,636	$ 4.30
Less: Fixed expenses	($ 55,000) ($ 48,000 + $ 7,000)
Net operating income	$ 67,636
4)
Miller Company Contribution income statement
	Total	Per unit
Sales	$ 224,378 (( 31,000 (-) 6% ) x $ 7.70 )	$ 7.70 ( $ 7 +10% )
Less: Variable expenses	( $ 125,302 ) (( 31,000 (-) 6% ) x $ 3 )	($ 4.30) ($ 4 + 0.30)
Contribution margin	$ 99,076	$ 3.4
Less: Fixed expenses	( $ 48,000)
Net operating income	$ 51,076