Question

Miller Company's contribution format income statement for the most recent month is shown below: 10 Sales (40,000 units) Variable expenses Contribution margin Fixed expenses Net operating income points Total $ 240,000 120,000 120,000 43,000 $ 77,000 Per Unit $6.00 3.00 $ 3.00 eBook Hint Print Required: (Consider each case independently): References 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 $1.30 per unit and the number of units sold increases by 22%? 3. What is the revised net operating income if the selling price increases by $1.30 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 10%, variable expenses increase by 10 cents per unit, and the number of units sold decreases by 5%? 1. Net operating income 2. Net operating income 3. Net operating income 4. Net operating income

Answer 1

7			Amount $		Amount $		Amount $		Amount $
Particulars	Amount $	per unit	sales increases by 17% (total 46800 units)	per unit	sales increases by 22% (total 48800 units) and sales price decreases by $1.3	per unit	sales unit decreases by 5% (total 38000 units), fixed expenses increases by $10000 and sales price increases by $1.3	per unit	sales unit decreases by 5% (total 38000 units), variable expenses increases by 0.10 per unit and sales price increases by 10%	per unit
Sales (40000 units)	240000	6	280800	6	229360	4.7	277400	7.3	250800	6.6
Variable Expenses	120000	3	140400	3	146400	3	114000	3	117800	3.1
Contribution margin	120000	3	140400	3	82960	1.7	163400	4.3	133000	3.5
Fixed expenses	43000		43000		43000		53000		43000
operating income	77000		97400		39960		110400		90000
1. sales increases by 17%	40000*17%+40000
	46800
2. sales increases by 22%	40000*22%+40000
	48800
New sales price	6-1.3
	4.7
3. sales decreases by 5%	40000-40000*5%
	38000
New sales price for 3	6+1.3
	7.3
Fixed Expenses	43000+10000
	53000
4 Sales price increases by 10%	6+6*10%
	6.6
Variable expenses increases by 10 cents per unit	3+0.10
	3.1
1. Net operating income	97400
2. Net operating income	39960
3. Net operating income	110400
4. Net operating income	90000

8. The high low cost method is a process where variable cost and fixed expenses are calculated on the basis of given data for a given period of time.

Particulars	Amount $
Highest activity cost	7022
Lowest activity cost	1118
Highest activity units	4120
Lowest activity units	430
Variable cost of electricity	(Highest activity cost - Lowest activity Cost)/( Highest activity units - Lowest activity units)
	(7022-1118)/(4120-430)
	1.6
Fixed Cost of Electricity p.m.	Highest Activity cost -( Variable cost X Highest activity units)
	7022-( 1.6 X 4120)
	430