Question

Miller Company's most recent contribution format income statement is shown below: Sales (30,000 units) Variable expenses Contribution margin Total $150,000 60,000 Per Unit $5.00 2.00 $3.00 Fixed expenses Net operating income 90,000 42,000 $ 48,000 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%.

2. The selling price decreases by $1.30 per unit, and the number of units sold increases by 23%.

3. The selling price increases by $1.30 per unit, fixed expenses increase by $6,000, and the number of units sold decreases by 7%.

4. The selling price increases by 20%, variable expenses increase by 20 cents per unit, and the number of units sold decreases by 11%.

     

Answer 1

Requirement 1:

Sales [(30,000 x 117%) x $5.00]	$175,500
Variable expenses [(30,000 x 117%) x $2.00]	($70,200)
Contribution margin	$105,300
Fixed expenses	($42,000)
Net operating income	$63,300

Requirement 2:

Sales [(30,000 x 123%) x ($5.00 - $1.30)]	$136,530
Variable expenses [(30,000 x 123%) x $2.00]	($73,800)
Contribution margin	$62,730
Fixed expenses	($42,000)
Net operating income	$20,730

Requirement 3:

Sales [(30,000 x 93%) x ($5.00 + $1.30)]	$175,770
Variable expenses [(30,000 x 93%) x $2.00]	($55,800)
Contribution margin	$119,970
Fixed expenses (42,000+6,000)	($48,000)
Net operating income	$71,970

Requirement 4:

Sales [(30,000 x 89%) x ($5.00 x 120%)]	$160,200
Variable expenses [(30,000 x 89%) x ($2.00+$0.20)]	($58,740)
Contribution margin	$101,460
Fixed expenses	($42,000)
Net operating income	$59,460