Question

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

	Total			Per Unit
Sales (38,000 units)	$	266,000		$	7.00
Variable expenses		152,000			4.00
Contribution margin		114,000		$	3.00
Fixed expenses		50,000
Net operating income	$	64,000

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 $1.10 per unit and the number of units sold increases by 19%?

3. What is the revised net operating income if the selling price increases by $1.10 per unit, fixed expenses increase by $7,000, 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 10%, variable expenses increase by 30 cents per unit, and the number of units sold decreases by 7%?

Answer 1

	Total		Per Unit
	Sales (38,000 units)	266,000	7
	Variable expenses	152,000	4
	Contribution margin	114,000	3
	Fixed expenses	50,000
	Net operating income	64,000
ans 1	Unit sold = 38000*112%=	42560
	Sales	297,920
	Variable expenses	170,240
	Contribution margin	127,680
	Fixed expenses	50,000
	Net operating income	77,680
ans 2
	Unit sold = 38000*119%=	45220
	Sales	266,798	45220*(7-1.1)
	Variable expenses	180,880
	Contribution margin	85,918
	Fixed expenses	50,000
	Net operating income	35,918
ans 3
	Unit sold = 38000*97%=	36860
	Sales	298566	36860*(7+1.1)
	Variable expenses	147,440
	Contribution margin	151,126
	Fixed expenses	57,000
	Net operating income	94,126
ans 4
	Unit sold = 38000*93%=	35340
	Sales	272118	35340*(7*110%)
	Variable expenses	130758	35340*(4-0.3)
	Contribution margin	141,360
	Fixed expenses	50,000
	Net operating income	91,360