Question

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

	Total			Per Unit
Sales (41,000 units)	$	246,000		$	6.00
Variable expenses		123,000			3.00
Contribution margin		123,000		$	3.00
Fixed expenses		48,000
Net operating income	$	75,000

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 $1.50 per unit and the number of units sold increases by 15%?

3. What is the revised net operating income if the selling price increases by $1.50 per unit, fixed expenses increase by $8,000, and the number of units sold decreases by 4%?

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 6%?

Answer 1

1

Income statement
Particulars	Per unit	Total
Units		47,560
Sales revenue	6.00	285,360
Minus:
Variable cost	3.00	142,680
Contribution margin	3.00	142,680
Minus:
Fixed cost		48,000
Net operating income		94,680

2

Income statement
Particulars	Per unit	Total
Units		47,150
Sales revenue	4.50	212,175
Minus:
Variable cost	3.00	141,450
Contribution margin	1.50	70,725
Minus:
Fixed cost		48,000
Net operating income		22,725

3

Income statement
Particulars	Per unit	Total
Units		39,360
Sales revenue	7.50	295,200
Minus:
Variable cost	3.00	118,080
Contribution margin	4.50	177,120
Minus:
Fixed cost		56,000
Net operating income		121,120

4

Income statement
Particulars	Per unit	Total
Units		38,540
Sales revenue	6.60	254,364
Minus:
Variable cost	3.30	127,182
Contribution margin	3.30	127,182
Minus:
Fixed cost		48,000
Net operating income		79,182