Question

Miller Company's contribution format income statement for the most recent month is shown below: Sales (30,000 units) Variable expenses Contribution margin Fixed expenses Net operating income Total $ 240,000 150,000 90,000 43,000 $ 47,000 Per Unit $8.00 5.00 $3.00 Required: (Consider each case independently): 1. What is the revised net operating income if unit sales increase by 12%? 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 23%? 3. What is the revised net operating income if the selling price increases by $1.50 per unit, fixed expenses increase by $10,000, and the number of units sold decreases by 5%? 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 14%? 1. Net operating income 2. Net operating income 3. Net operating income 4. Net operating income

Answer 1

1)
Sales (33600 units*$8)	$         2,68,800		Sales units = 30000+12%=33600
Variable expenses (33600 units*$5)	$         1,68,000
Contribution Margin	$         1,00,800
Fixed Expenses	$             43,000
Net Operating Income	$             57,800
2)
Sales (36900 units*$6.5)	$         2,39,850		Sales Price = $8-1.5=$6.5
Variable expenses (28500 units*$5)	$         1,84,500		Number of units =30000+23%=36900
Contribution Margin	$             55,350
Fixed Expenses	$             43,000
Net Operating Income	$             12,350
3)
Sales (28500 units*$9.5)	$         2,70,750		Sales Units = 30000-5%=28500
Variable expenses (28500 units*$5)	$         1,42,500		Selling price =$8+1.5=9.5
Contribution Margin	$         1,28,250		Fixed Expenses = $43000+10000=53000
Fixed Expenses	$             53,000
Net Operating Income	$             75,250
4)
Sales (25800 units*$9.6)	$         2,47,680		Selling price = $8+20%=$9.6
Variable expenses (25800 units*$6.5)	$         1,67,700		Variable Expenses= $5+30%=6.5
Contribution Margin	$             79,980		Sales Units= 30000-14%=25800
Fixed Expenses	$             43,000
Net Operating Income	$             36,980