Question

Miller Company's contribution format income statement for the most recent month is shown below. Sales (36,000 units) Variable expenses Contribution margin Fixed expenses Net operating income Total $288,000 180, 808 188,000 49,000 $ 59,000 Per Unit $8.00 5.89 $3.89 Required: (Consider each case independently 1. What is the revised net operating income if unit sales increase by 19%? 2. What is the revised net operating income if the selling price decreases by $1.40 per unit and the number of units sold increases by 15% 3. What is the revised net operating income if the selling price increases by $1.40 per unit, fixed expenses increase by $6.000, and the number of units sold decreases by 3%? 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 15%? 11. Net operating income

Answer 1

Correct Answer:

Net Operating income 1	$      79,520.00
Net Operating income 2	$      17,240.00
Net Operating income 3	$      98,648.00
Net Operating income 4	$      64,220.00

Working:

Requirement	1	2	3	4
Sales	$ 3,42,720.00	$ 2,73,240.00	$ 3,28,248.00	$    2,69,280.00
Less: Variable Expense	$ 2,14,200.00	$ 2,07,000.00	$ 1,74,600.00	$    1,56,060.00
Contribution margin	$ 1,28,520.00	$      66,240.00	$ 1,53,648.00	$    1,13,220.00
Fixed Expenses	$      49,000.00	$      49,000.00	$      55,000.00	$        49,000.00
Net Operating income	$      79,520.00	$      17,240.00	$      98,648.00	$        64,220.00

1: sale increase by 19%

36000 * 1.19 = 42,840 units

2: units sold increased by 15 %

36000 *1.15 = 41,400 units new selling price =

3: unit sold decrease by 3%

36000* 0.97 = 34,920

4: units sold decrease by 15 %

36000 * 0.85 = 30600

End of answer.

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