Question

Miller Company's most recent contribution format income statement is shown below: Sales (39,000 units) Variable expenses Contribution margin Fixed expenses Net operating income Total $234,000 117,000 117,000 41,000 $ 76,000 Per Unit $6.00 3.00 $3.00 Required: Prepare a new contribution format income statement under each of the following conditions (consider each case independently): (Do not round intermediate calculations. Round your "Per unit" answers to 2 decimal places.) 1. The number of units sold increases by 17%. Miller Company Contribution Income Statement Total Per Unit Sales $ 273,780 $ 6.00 Variable expenses 3.00 Contribution margin 273,780 $ 3.00 Fixed expenses Net operating income $ 273,780

Answer 1

1.

Increase in sales 17% = 39,000 x 17%

= 6,630 units

Sales quantity = 39,000+6,630

= 45,630

Miller Company
Contribution Income Statement
	Total	Per Unit
Sales (45,630 x 6)	273,780	6
Variable expenses (45,630 x 3)	-136,890	3
Contribution Margin	$136,890	3
Fixed expenses	-41,000
Net operating income	$95,890

2.

Decrease in selling price = $1.30 per unit

Selling price per unit = 6-1.30

= $4.70

Increase in sales unit = 22%

= 39,000 x 22%

= 8,580 units

Sales quantity = 39,000+8,580

= 47,580 units

Miller Company
Contribution Income Statement
	Total	Per Unit
Sales (47,580 x 4.70)	223,626	4.70
Variable expenses (47,580 x 3)	-142,740	3
Contribution Margin	$80,886	1.70
Fixed expenses	-41,000
Net operating income	$39,886

3.

Increase in selling price = $1.30 per unit

Selling price per unit = 6+1.30

= $7.30

Increase in fixed expenses = $6,000

Fixed expenses = 41,000+6,000

= $47,000

Decrease in sales = 4%

= 39,000 x 4%

= 1,560 units

Sales quantity = 39,000-1,560

= 37,440 units

Miller Company
Contribution Income Statement
	Total	Per Unit
Sales (37,440 x 7.30)	273,312	7.30
Variable expenses (37,440 x 3)	-112,320	3
Contribution Margin	$160,992	4.30
Fixed expenses	-47,000
Net operating income	$113,992

4.

Increase in selling price = 10%

= 6 x 10%

= $0.6

Selling price per unit = 6+0.6

= $6.6

Increase in variable expense = 10 cents per unit

Variable cost per unit = 3+0.10

= $3.10

Decrease in sales = 14%

= 39,000 x 14%

= 5,460 units

Sales quantity = 39,000-5,460

= 33,540

Miller Company
Contribution Income Statement
	Total	Per Unit
Sales (33,540 x 6.60)	221,364	6.60
Variable expenses (33,540 x 3.10)	-103,974	3.10
Contribution Margin	$117,390	3.50
Fixed expenses	-41,000
Net operating income	$76,390

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