Question

4. acct

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

	Total			Per Unit
Sales (38,000 units)	$	304,000		$	8.00
Variable expenses		190,000			5.00
Contribution margin		114,000		$	3.00
Fixed expenses		49,000
Net operating income	$	65,000

Required:

(Consider each case independently):

1. What is the revised net operating income if unit sales increase by 17%?

2. What is the revised net operating income if the selling price decreases by $1.20 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 $1.20 per unit, fixed expenses increase by $5,000, and the number of units sold decreases by 3%?

4. What is the revised net operating income if the selling price per unit increases by 20%, variable expenses increase by 20 cents per unit, and the number of units sold decreases by 5%?

Answer 1

1) Revised net operating income

	Total			Per Unit
Sales (38,000*1.17 units)	$	355680		$	8.00
Variable expenses		222300			5.00
Contribution margin		133380		$	3.00
Fixed expenses		49,000
Net operating income	$	84380

2) Revised net operating income

	Total			Per Unit
Sales (38,000*1.24 units)	$	320416		$	6.80
Variable expenses		235600			5.00
Contribution margin		84816		$	1.8
Fixed expenses		49,000
Net operating income	$	35816

3) Revised net operating income

	Total			Per Unit
Sales (38,000*.97 units)	$	339112		$	9.20
Variable expenses		184300			5.00
Contribution margin		154812		$	4.20
Fixed expenses		54000
Net operating income	$	100812

4) Revised net operating income

	Total			Per Unit
Sales (38,000*.95)	$	346560		$	9.60
Variable expenses		187720			5.20
Contribution margin		158840		$	4.4
Fixed expenses		49,000
Net operating income	$	109840