Question

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

	Total			Per Unit
Sales (43,000 units)	$	430,000		$	10.00
Variable expenses		301,000			7.00
Contribution margin		129,000		$	3.00
Fixed expenses		43,000
Net operating income	$	86,000

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 19%?

3. What is the revised net operating income if the selling price increases by $1.30 per unit, fixed expenses increase by $6,000, 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 9%?

1. Net operating income________

2. Net operating income________

3. Net operating income________

4. Net operating income_________

Answer 1

1.

Sales ($430,000*113%)	$ 485,900
Variable expenses ($301,000*113%)	$ 340,130
Contribution margin	$ 145,770
Fixed expenses	$    43,000
Net operating income	$ 102,770

2.

Sales ((43,000*119%)*($10-$1.30))	$ 445,179
Variable expenses ((43,000*119%)*$7)	$ 358,190
Contribution margin	$    86,989
Fixed expenses	$    43,000
Net operating income	$    43,989

3.

Sales ((43,000*94%)*($10+$1.30))	$ 456,746
Variable expenses ((43,000*94%)*$7)	$ 282,940
Contribution margin	$ 173,806
Fixed expenses ($43,000+$6,000)	$    49,000
Net operating income	$ 124,806

4.

Sales ((43,000*91%)*($10*120%))	$ 469,560
Variable expenses ((43,000*91%)*($7*120%))	$ 328,692
Contribution margin	$ 140,868
Fixed expenses	$    43,000
Net operating income	$    97,868