Question

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

	Total			Per Unit
Sales (34,000 units)	$	340,000		$	10.00
Variable expenses		238,000			7.00
Contribution margin		102,000		$	3.00
Fixed expenses		49,000
Net operating income	$	53,000

Required:

(Consider each case independently):

1. What is the revised net operating income if unit sales increase by 16%?

2. What is the revised net operating income if the selling price decreases by $1.40 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 $1.40 per unit, fixed expenses increase by $8,000, and the number of units sold decreases by 6%?

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 11%?

Answer 1

Answer:-1)-

Miller Company
Contribution Format Income statement
Particulars		Amount
		$
Sales	(34000 units*116%)*$10 per unit	394400
Less:- Variable costs	39440 units*$7 per unit	276080
Contribution margin		118320
Less:- Fixed costs		49000
Net opreating income		69320

2)-

Miller Company
Contribution Format Income statement
Particulars		Amount
		$
Sales	(34000 units*124%)*($10.00 per unit-$1.40 per unit)	362576
Less:- Variable costs	42160 units*$7 per unit	295120
Contribution margin		67456
Less:- Fixed costs		49000
Net opreating income		18456

3)-

Miller Company
Contribution Format Income statement
Particulars		Amount
		$
Sales	(34000 units*96%)*($10.00 per unit+$1.40 per unit)	372096
Less:- Variable costs	32640 units*$7 per unit	228480
Contribution margin		143616
Less:- Fixed costs	$49000+$8000	57000
Net opreating income		86616

4)-

Miller Company
Contribution Format Income statement
Particulars		Amount
		$
Sales	(34000 units*89%)*($10.00 per unit*120%)	363120
Less:- Variable costs	30260 units*($7 per unit*120%)	254184
Contribution margin		108936
Less:- Fixed costs		57000
Net opreating income		51936