In: Accounting
Miller Company’s contribution format income statement for the most recent month is shown below:
Total | Per Unit | |||||
Sales (31,000 units) | $ | 155,000 | $ | 5.00 | ||
Variable expenses | 62,000 | 2.00 | ||||
Contribution margin | 93,000 | $ | 3.00 | |||
Fixed expenses | 47,000 | |||||
Net operating income | $ | 46,000 | ||||
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 24%?
3. What is the revised net operating income if the selling price increases by $1.10 per unit, fixed expenses increase by $6,000, and the number of units sold decreases by 4%?
4. What is the revised net operating income if the selling price per unit increases by 20%, variable expenses increase by 30 cents per unit, and the number of units sold decreases by 6%?
1.
Total | Per unit | |
Sales (35,340 units × $5) | $176,700 | $5 |
Less: Variable Expenses (35,340 units ×$2) | ($70,680) | $2 |
Contribution Margin | $106,020 | $3 |
Less: Fixed expenses | ($47,000) | |
Net operating income | $59,020 |
Explanation:-
31,000 units + (31,000 units ×14%) |
31,000 units + 4,340 units |
35,340 units |
2.
Total | Per unit | |
Sales (38,440 units ×$3.9) | $149,916 | $3.9 ($5 - $1.1) |
Less: Variable expenses (38,440 units × $2) | $76,880 | $2 |
Contribution margin | $73,036 | $1.9 |
Less: Fixed expenses | ($47,000) | |
Net operating income | $26,036 |
Explanation:-
31,000 units + (31,000 units ×24%) |
31,000 units + 7,440 units |
38,440 units |
3.
Total | Per uni | |
Sales (29,760 units × $6.1) | $181,536 | $6.1 ($5 + $1.1) |
Less: Variable expenses (29,760 units × $2) | ($59,520) | $2 |
Contribution margin | $122,016 | $4.1 |
Less: Fixed expenses ($47,000 +$6,000) | ($53,000) | |
Net operating income | $69,016 |
Explanation:-
31,000 units - (31,000 units × 4%) |
31,000 units - 1,240 units |
29,760 units |
4.
Total | Per unit | |
Sales (29,140 × $6) | $174,840 | $6 |
Less: Variable expenses (29,140 × $2.3) | ($67,022) | $2.3 |
Contribution margin | $107,818 | 3.7 |
Less: Fixed expenses | ($47,000) | |
Net operating income | $60,818 |
Explanation:-
31,000 units - (31,000 units × 6%) |
31,000 units - 1,860 units |
29,140 units |
Selling price per unit = $5 + ($5 × 20%) |
Selling price per unit = $5 + $1 |
Selling price per unit = $6 |
Variable expense per unit = $2 + (30 cents/100) |
Variable expense per unit = $2 + $0.3 |
Variable expense per unit = $2.3 |