Question

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

	Total			Per Unit
Sales (41,000 units)	$	328,000		$	8.00
Variable expenses		205,000			5.00
Contribution margin		123,000		$	3.00
Fixed expenses		41,000
Net operating income	$	82,000

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 $1.10 per unit and the number of units sold increases by 23%?

3. What is the revised net operating income if the selling price increases by $1.10 per unit, fixed expenses increase by $9,000, and the number of units sold decreases by 5%?

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 14%?

Answer 1

Requirement 1 revised net operating income if unit sales increase by 17%

	total	per unit
Sales (47,970 units)	383760	8
Variable expenses	239850	5
Contribution margin	143910	3
Fixed expenses	41,000
Net operating income	1,02,910

Requirement 2 revised net operating income if the selling price decreases by $1.10 per unit and the number of units sold increases by 23%

	total	per unit
Sales (50,430 units)	347967	6.9
Variable expenses	252150	5
Contribution margin	95817	2
Fixed expenses	41,000
Net operating income	54,817

Requirement 3 revised net operating income if the selling price increases by $1.10 per unit, fixed expenses increase by $9,000, and the number of units sold decreases by 5%

	total	per unit
Sales (38,950 units)	354445	9.1
Variable expenses	194750	5
Contribution margin	159695	4.1
Fixed expenses	50,000
Net operating income	1,09,695

Requirement 4 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 14%

	total	per unit
Sales (35,260 units)	310288	8.8
Variable expenses	186878	5.3
Contribution margin	123410	4
Fixed expenses	41,000
Net operating income	82,410