Question

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

	Total			Per Unit
Sales (37,000 units)	$	185,000		$	5.00
Variable expenses		74,000			2.00
Contribution margin		111,000		$	3.00
Fixed expenses		40,000
Net operating income	$	71,000

Required:

(Consider each case independently):

1. What is the revised net operating income if unit sales increase by 13%?

2. What is the revised net operating income if the selling price decreases by $1.30 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 $1.30 per unit, fixed expenses increase by $7,000, and the number of units sold decreases by 7%?

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 12%?

Answer 1

1. What is the revised net operating income if unit sales increase by 13%?

	Total	Per unit
Sales	209050	5
Variable cost	83620	2
Contribution margin	125430	3
Fixed cost	40000
Net operating income	85430

2. What is the revised net operating income if the selling price decreases by $1.30 per unit and the number of units sold increases by 23%?

Sales	168387	3.7
Variable cost	91020	2
Contribution margin	77367	1.7
Fixed cost	40000
Net operating income	37367

3. What is the revised net operating income if the selling price increases by $1.30 per unit, fixed expenses increase by $7,000, and the number of units sold decreases by 7%?

Sales	216783	6.3
Variable cost	68820	2
Contribution margin	147963	4.3
Fixed cost	47000
Net operating income	100963

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 12%?

	Total	per unit
Sales	179080	5.5
Variable cost	74888	2.3
Contribution margin	104192	3.2
Fixed cost	40000
Net operating income	64192