Question

Miller Company's contribution format income statement for the most recent month is shown below: Sales (43,000 units) Variable expenses Contribution margin Fixed expenses Net operating income Total $ 258,000 129,000 129,000 48,000 $ 81,000 Per Unit $ 6.00 3.00 $ 3.00 Required: (Consider each case independently): 1. What is the revised net operating income if unit sales increase by 17%? 2. What is the revised net operating income if the selling price decreases by $1.20 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 $1.20 per unit, fixed expenses increase by $7,000, 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 10%, variable expenses increase by 20 cents per unit, and the number of units sold decreases by 15%? 1. Net operating income 2. Net operating income 3. Net operating income 4. Net operating income

Answer 1

1) revised net operating income if unit sales increase by 17%

if sales unit's increase/decrease there will be proportional increase/decrease in variable cost

but if selling price per unit increase/DECREASE that will not effect VARIABLE COST

Particular	per unit	amount ($)
Sales (43000+17%) 50310units	$6	301860
(-) variable expenses	$3	(150930)
CONTRIBUTION	$3	150930
(-) fixed expenses		(48000)
NET OPERATING INCOME		102930

2) revised net operating income selling price per unit decrease by 1.20 per unit, units sold increase by 20%

Particular	per unit	amount ($)
Sales (43000+20%)51600	($6-$1.2)$4.8	247680
(-) variable expenses	$3	(154800)
CONTRIBUTION	$1.8	92880
(-) fixed expenses		(48000)
Net operating income		44880

3) revised net operating income,if selling price per unit increase by,$1.20 ,per unit, fixed expenses increase by$7000, unit's sold decrease by 8%

Particular	per unit	amount ($)
Sales (43000-8%)38560units	($6+$1.20)$7.20	284832
(-) variable expenses	$3	(115680)
CONTRIBUTION	$4.20	169152
(-) fixed expenses (48000+7000)		(55000)
Net operating income		114152

4) revised net operating income,if selling price per unit increase by 10%,and variable expenses per unit increase by 20%, units sold decrease by 15%

Particular	per unit	amount ($)
Sales(43000-15%)36550	($6+10%)$6.6	241230
(-) variable expenses	($3+0.2)$3.2	(116960)
CONTRIBUTION	$3.4	124270
(-) fixed expenses		(48000)
NET OPERATING INCOME		76270

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