Question

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

	Total			Per Unit
Sales (32,000 units)	$	160,000		$	5.00
Variable expenses		64,000			2.00
Contribution margin		96,000		$	3.00
Fixed expenses		43,000
Net operating income	$	53,000

Required:

(Consider each case independently):

1. What is the revised net operating income if unit sales increase by 10%?

2. What is the revised net operating income if the selling price decreases by $1.20 per unit and the number of units sold increases by 18%?

3. What is the revised net operating income if the selling price increases by $1.20 per unit, fixed expenses increase by $9,000, and the number of units sold decreases by 4%?

4. What is the revised net operating income if the selling price per unit increases by 10%, variable expenses increase by 10 cents per unit, and the number of units sold decreases by 11%?

	1. Net operating income 2. Net operating income 3. Net operating income 4. Net operating income

Answer 1

	Existing:	Total	Per Unit
	Sales (32000 units)	$      1,60,000	$              5.00
	Variable expenses	$          64,000	$              2.00
	Contribution margin	$          96,000	$              3.00
	Fixed expenses	$          43,000
	Net operating income	$          53,000
1)		Total	Per Unit
	Sales (35200 units)	$      1,76,000	$              5.00
	Variable expenses	$          70,400	$              2.00
	Contribution margin	$      1,05,600	$              3.00
	Fixed expenses	$          43,000
	Net operating income	$          62,600
2)	Sales (37760 units)	$      1,43,488	$              3.80
	Variable expenses	$          75,520	$              2.00
	Contribution margin	$          67,968	$              1.80
	Fixed expenses	$          43,000
	Net operating income	$          24,968
3)	Sales (30720 units)	$      1,90,464	$              6.20
	Variable expenses	$          61,440	$              2.00
	Contribution margin	$      1,29,024	$              3.00
	Fixed expenses	$          52,000
	Net operating income	$          77,024
4)	Sales (28480 units)	$      1,56,640	$              5.50
	Variable expenses	$          59,808	$              2.10
	Contribution margin	$          96,832	$              3.00
	Fixed expenses	$          43,000
	Net operating income	$          53,832
	ANSWERS:
1	Net operating income	$       53,000
2	Net operating income	$       62,600
3	Net operating income	$       77,024
4	Net operating income	$          53,832