Question

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

	Total	Per Unit
Sales (32,000 units)	$320,000	$10.00
Variable expenses	224,000	7.00
Contribution margin	96,000	$3.00
Fixed expenses	43,000
Net operating income	$ 53,000

1. The number of units sold increases by 19%.

2. The selling price decreases by $1.20 per unit, and the number of units sold increases by 21%.

3. The selling price increases by $1.20 per unit, fixed expenses increase by $8,000, and the number of units sold decreases by 2%.

4. The selling price increases by 10%, variable expenses increase by 20 cents per unit, and the number of units sold decreases by 6%.

Answer 1

Ans.1	Miller's Company
	Income Statement
	Particulars		Amt.($)
	Sales (38,080units @10) (W.N.1)		380,800
	Less: Variable expenses ($7 p.u.)		266,560
	Contribution Margin		114,240
	Less: Fixed Expenses		43,000
	Net Operating Income		71,240
	Work.Note:- The number of units sold increases by 19%.
	Total Units Sold=	32,000 + (32,000*19%)
	=	38,080
Ans.2	Miller's Company
	Income Statement
	Particulars		Amt.($)
	Sales (38,720units @8.80) (W.N.1&2)		340,736
	Less: Variable expenses ($7 p.u.)		266,560
	Contribution Margin		74,176
	Less: Fixed Expenses		43,000
	Net Operating Income		31,176
	Work.Note:-
	1).The number of units sold increases by 19%.
	Total Units Sold=	32,000 + (32,000*21%)
	=	38,720
	2).Selling price decreases by $1.20 per unit.
	Selling price =	$ (10 - 1.20)
	=	$           8.80
Ans.3	Miller's Company
	Income Statement
	Particulars		Amt.($)
	Sales (31,360units @11.20) (W.N.1&2)		351,232
	Variable expenses ($7 p.u.)		266,560
	Contribution Margin		84,672
	Less: Fixed Expenses (W.N.3)		51,000
	Net Operating Income		33,672
	Work.Note:-
	1).The number of units sold decreases by 2%.
	Total Units Sold=	32,000 - (32,000*2%)
	=	31,360
	2).Selling price decreases by $1.20 per unit.
	Selling price =	$ (10 + 1.20)
	=	$        11.20
	3).Fixed expenses increases by $8,000
Ans.4	Miller's Company
	Income Statement
	Particulars		Amt.($)
	Sales (30,080units @11) (W.N.1&2)		330,880
	Less: Variable expenses (W.N.3)		319,872
	Contribution Margin		11,008
	Less: Fixed Expenses		43,000
	Net Operating Income		(31,992)
	Work.Note:-
	1).The number of units sold decreases by 6%.
	Total Units Sold=	32,000 - (32,000*6%)
	=	30,080
	2).Selling price increases by 10%.
	Selling price =	$10 +(10*10%)
	=	$        11.00
	3).Variable expenses increases by 20% per unit.
	Variable price =	$7 + (7*20%)
	=	$           8.40