Question

Chapter 6 quiz

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

	Total			Per Unit
Sales (43,000 units)	$	301,000		$	7.00
Variable expenses		172,000			4.00
Contribution margin		129,000		$	3.00
Fixed expenses		47,000
Net operating income	$	82,000

Required:

(Consider each case independently):

1. What is the revised net operating income if unit sales increase by 12%?

2. What is the revised net operating income if the selling price decreases by $1.30 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 $1.30 per unit, fixed expenses increase by $7,000, and the number of units sold decreases by 8%?

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 12%?

Answer 1

1. What is the revised net operating income if unit sales increase by 12%?

	total	per unit
sale (12% increase)	337,120	7
variable expense (12% increase)	192,640	4
contribution margin	144,480
fixed expense	47,000
net operating income	97,480

2. What is the revised net operating income if the selling price decreases by $1.30 per unit and the number of units sold increases by 18%?

	total	per unit
sale (18% increase) (50,740 units)	289,218	5.7
variable expense (50,740 units)	202,960	4
contribution margin	86,258
fixed expense	47,000
net operating income	39,258

3. What is the revised net operating income if the selling price increases by $1.30 per unit, fixed expenses increase by $7,000, and the number of units sold decreased by 8%?

	total	per unit
sale (8% decrease) ( 39,560 units)	328,348	8.3
variable expense (39,560 units)	158,240	4
contribution margin	170,108
fixed expense	54,000
net operating income	116,108

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 decreased by 12%?

	total	per unit
sale (12% decrease) ( 37,840 units)	291,368	7.7
variable expense (37,840 units)	151,662.72	4.008
contribution margin	139,705.28
fixed expense	47,000
net operating income	92,705.28