Question

Exercise 5-13 Changes in Selling Price, Sales Volume, Variable Cost per Unit, and Total Fixed Costs [LO5-1, LO5-4]

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

	Total			Per Unit
Sales (36,000 units)	$	252,000		$	7.00
Variable expenses		144,000			4.00
Contribution margin		108,000		$	3.00
Fixed expenses		49,000
Net operating income	$	59,000

Required:

(Consider each case independently):

1. What is the revised net operating income if unit sales increase by 15%?

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 20%?

3. What is the revised net operating income if the selling price increases by $1.30 per unit, fixed expenses increase by $9,000, and the number of units sold decreases by 8%?

4. What is the revised net operating income if the selling price per unit increases by 20%, variable expenses increase by 30 cents per unit, and the number of units sold decreases by 12%?

Answer 1

1)
	Sale units	(36000*115%)=			41400
	contribution margin per unit				3
	total contribution margin				124200
	less:fixed expense				49,000
	Net operating income				75,200
2)
	Sale units	(36000*120%)=			43200
	contribution margin per unit			(3-1.30)=	1.7
	total contribution margin				73440
	less:fixed expense				49,000
	Net operating income				24,440
3)
	Sale units	(36000*92%)=			33120
	contribution margin per unit			(3+1.30)=	4.3
	total contribution margin				142416
	less:fixed expense				58,000
	Net operating income				84,416
4)	Selling price per unit		(7*120%)=		8.4
	varible expense		(4+.30)		4.3
	contribution margin per unit				4.1
	Sale units	(36000*88%)=			31680
	contribution margin per unit				4.1
	total contribution margin				129888
	less:fixed expense				49,000
	Net operating income				80,888