Question

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

	Total			Per Unit
Sales (35,000 units)	$	175,000		$	5.00
Variable expenses		70,000			2.00
Contribution margin		105,000		$	3.00
Fixed expenses		40,000
Net operating income	$	65,000

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 $1.50 per unit and the number of units sold increases by 24%?

3. What is the revised net operating income if the selling price increases by $1.50 per unit, fixed expenses increase by $9,000, and the number of units sold decreases by 6%?

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 9%?

Answer 1

Contribution margin Income Statement:
Sales				196000	(35000+12% =39200 units @5)
Less: Variable cost			78400	(39200 units @ 2)
Contribution margin		117600
Less: Fixed cost			40,000
Net Income			77,600
Contribution margin Income Statement:
Sales				151900	(35000+24% = 43400 units @ 3.50)
Less: Variable cost			86800	(43400 units @2)
Contribution margin		65100
Less: Fixed cost			40,000
Net Income			25,100
Contribution margin Income Statement:
Sales				213850	(35000-6% = 32900 units @ 6.50)
Less: Variable cost			65800	(32900 units @ 2)
Contribution margin		148050
Less: Fixed cost			49,000	(40000+9000)
Net Income			99,050
Contribution margin Income Statement:
Sales				175175	(35000-9% = 31850 units @ 5.50)
Less: Variable cost			70070	(31850 units @ 2.20)
Contribution margin		105105
Less: Fixed cost			40,000
Net Income			65,105