Question

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

	Total			Per Unit
Sales (37,000 units)	$	259,000		$	7.00
Variable expenses		148,000			4.00
Contribution margin		111,000		$	3.00
Fixed expenses		45,000
Net operating income	$	66,000

Required:

(Consider each case independently):

1. What is the revised net operating income if unit sales increase by 14%?

2. What is the revised net operating income if the selling price decreases by $1.10 per unit and the number of units sold increases by 16%?

3. What is the revised net operating income if the selling price increases by $1.10 per unit, fixed expenses increase by $10,000, and the number of units sold decreases by 7%?

4. What is the revised net operating income if the selling price per unit increases by 10%, variable expenses increase by 20 cents per unit, and the number of units sold decreases by 11%?

Answer 1

1)
	Sale units	(37000*114%)=			42180
	contribution margin per unit				3
	total contribution margin				126540
	less:fixed expense				45,000
	Net operating income				81,540
2)
	Sale units	(37000*116%)=			42920
	contribution margin per unit			(3-1.10)	1.9
	total contribution margin				81548
	less:fixed expense				45,000
	Net operating income				36,548
3)
	Sale units	(37000*93%)=			34410
	contribution margin per unit			(3+1.10)=	4.1
	total contribution margin				141081
	less:fixed expense				55,000
	Net operating income				86,081
4)	Selling price per unit		(7*110%)=		7.7
	varible expense		(4+.20)		4.2
	contribution margin per unit				3.5
	Sale units	(37000*89%)=			32930
	contribution margin per unit				3.5
	total contribution margin				115255
	less:fixed expense				45,000
	Net operating income				70,255