Question

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

	Total			Per Unit
Sales (38,000 units)	$	380,000		$	10.00
Variable expenses		266,000			7.00
Contribution margin		114,000		$	3.00
Fixed expenses		45,000
Net operating income	$	69,000

Required:

(Consider each case independently):

1. What is the revised net operating income if unit sales increase by 11%?

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 18%?

3. What is the revised net operating income if the selling price increases by $1.30 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 10%, variable expenses increase by 20 cents per unit, and the number of units sold decreases by 13%?

Answer 1

Req 1.
Contribution Margin Income statemetn
Sales revenue		(38000+11%)*10			421800
Less: variable c ost		(38000+11%)*7			295260
Contribution margin					126540
Less: Fixed cost					45000
Net Operatting income					81540
Req 2.
Contribution Margin Income statemetn
Sales revenue		(38000+18%)*(10-1.30)			390108
Less: variable c ost		(38000+18%)*7			313880
Contribution margin					76228
Less: Fixed cost					45000
Net Operatting income					31228
Req 3.
Contribution Margin Income statemetn
Sales revenue		(38000-6%)*(10+1.30)			403636
Less: variable c ost		(38000-6%)*7			250040
Contribution margin					153596
Less: Fixed cost		(45000+8000)			53000
Net Operatting income					100596
Req 4.
Contribution Margin Income statemetn
Sales revenue		(38000-13%)*(10+10%)			363660
Less: variable c ost		(38000-13%)*6.80			224808
Contribution margin					138852
Less: Fixed cost					45000
Net Operatting income					93852