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. Unit Sales = 43,000 + 12% * 43,000 = 48160

	Total	Per unit
Sales (48160)	$337,120	7
variable expense	192,640	4
Contribution margin	144,480	3
Fixed expense	47000
net operating income	$97,480

2. Selling Price per unit = $7.00 - $1.30
Selling Price per unit = $5.70

Unit Sales = 43,000 + 18% * 43,000
Unit Sales = 50740

	Total	Per unit
Sales (50740)	$289,218	5.70
variable expense	202960	4
Contribution margin	86258	3
Fixed expense	47000
net operating income	$39,258

3. Selling Price per unit = $7.00 + $1.30
Selling Price per unit = $8.30

Fixed Expenses = $47,000 + $7,000
Fixed Expenses = $54,000

Unit Sales = 43,000 - 8% * 43,000
Unit Sales = 39,560

	Total	Per unit
Sales (39560)	$328,348	8.30
variable expense	158,240	4
Contribution margin	170,108	3
Fixed expense	54000
net operating income	$116,108

4.

Selling Price per unit = $7.00 + 10% * $7.00
Selling Price per unit = $7.7

Variable Expenses per unit = $4.00 + $0.20
Variable Expenses per unit = $4.20

Unit Sales = 43,000 - 12% * 43,000
Unit Sales = 38,540

	Total	Per unit
Sales (38540)	$296,758	7.70
variable expense	161,868	4.20
Contribution margin	134,890	3
Fixed expense	47000
net operating income	$87,890