Miller Company’s contribution format income statement for the most recent month is shown below: Total Per Unit Sales (32,000 units) $ 192,000 $ 6.00 Variable expenses 96,000 3.00 Contribution margin 96,000 $ 3.00 Fixed expenses 45,000 Net operating income $ 51,000 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 $1.20 per unit and the number of units sold increases by 18%? 3. What is the revised net operating income if the selling price increases by $1.20 per unit, fixed expenses increase by $8,000, 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 10%, variable expenses increase by 20 cents per unit, and the number of units sold decreases by 10%?
Answer-
1 | Net operating income | $63480 |
2 | Net operating income | $22968 |
3 | Net operating income | $73336 |
4 | Net operating income | $41400 |
Explanation-
Miller Company | ||
Operating income | ||
Particulars | Amount $ | |
Sales | (32000 units*1.13)*$6 per unit | 216960 |
Less:- Variable cost | 36160 units*$3 per unit | 108480 |
Contribution | 108480 | |
Less:- Fixed costs | 45000 | |
Net operating income | 63480 | |
Miller Company | ||
Operating income | ||
Particulars | Amount $ | |
Sales | (32000 units*1.18)*($6 per unit-$1.20 per unit) | 181248 |
Less:- Variable cost | 37760 units*$3 per unit | 113280 |
Contribution | 67968 | |
Less:- Fixed costs | 45000 | |
Net operating income | 22968 | |
Miller Company | ||
Operating income | ||
Particulars | Amount $ | |
Sales | (32000 units*94%)*($6 per unit+$1.20 per unit) | 216576 |
Less:- Variable cost | 28200 units*$3 per unit | 90240 |
Contribution | 126336 | |
Less:- Fixed costs | (45000+8000) | 53000 |
Net operating income | 73336 | |
Miller Company | ||
Operating income | ||
Particulars | Amount $ | |
Sales | (32000 units*90%)*($6 per unit*1.10) | 190080 |
Less:- Variable cost | 28800 units*($3 per unit*1.20) | 103680 |
Contribution | 86400 | |
Less:- Fixed costs | 45000 | |
Net operating income | 41400 |
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