Question

Miller Company’s contribution format income statement for the most recent month is shown below:

	Total			Per Unit
Sales (38,000 units)	$	228,000		$	6.00
Variable expenses		114,000			3.00
Contribution margin		114,000		$	3.00
Fixed expenses		43,000
Net operating income	$	71,000

Required:

(Consider each case independently):

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 $1.10 per unit and the number of units sold increases by 16%?

3. What is the revised net operating income if the selling price increases by $1.10 per unit, fixed expenses increase by $7,000, 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 20%, variable expenses increase by 30 cents per unit, and the number of units sold decreases by 12%?

	1. Net operating income 2. Net operating income 3. Net operating income 4. Net operating income

Answer 1

Calculate net operating income

a) Contribution margin income statement

	Total			Per Unit
Sales (44460 units)	$266760			$	6.00
Variable expenses	133380				3.00
Contribution margin	133380			$	3.00
Fixed expenses	43000
Net operating income	$90380

b) Contribution margin income statement

	Total			Per Unit
Sales (44080 units)	$	215992		$	4.9
Variable expenses		132240			3.00
Contribution margin		83752		$	1.9
Fixed expenses		43,000
Net operating income	$	40752

c) Contribution margin income statement

	Total			Per Unit
Sales (35720 units)	$	253612		$	7.10
Variable expenses		107160			3.00
Contribution margin		146452		$	4.1
Fixed expenses		50000
Net operating income	$	96452

d) contribution margin income statement

	Total			Per Unit
Sales (33440 units)	$	240768		$	7.20
Variable expenses		110352			3.30
Contribution margin		130416		$	3.90
Fixed expenses		43,000
Net operating income	$	87416