Question

Miller Company's contribution format income statement for the most recent month is shown below: Sales (44,000 units) Variable expenses Contribution margin Fixed expenses Net operating income Total $ 264,000 132,000 132,000 40,000 $ 92,000 Per Unit $6.00 3.00 $ 3.00 Required: (Consider each case independently): 1. What is the revised net operating income if unit sales increase by 11%? 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 23%? 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 6%? 4. What is the revised net operating income if the selling price per unit increases by 20%, variable expenses increase by 10 cents per unit, and the number of units sold decreases by 14%? 1. Net operating income 2. Net operating income 3. Net operating income 4. Net operating income

Answer 1

1. Revised net operating income if unit sales increases by 11%

Particulars Total(in $) Per unit(in $)

Sales(44000*1.11*6) 293040

Less: Variable expenses(44000*1.11*3) 146520

Contribution margin 146520

Less: Fixed expenses 40000

Net operating income 106520

2.Revised net operating income if selling price decreases by 1.3 per unit and no of units sold increases by 23%

Particulars Total(in $)   

Sales( 44000*1.23*(4.7)) 254364

Less: Variable expenses(44000*1.23*3)   162360

Contribution margin 92004

Less: Fixed expenses 40000

Net operating income 52004

3.Revised net operating income if selling price increases by 1.3 per unit, fixed expenses increases by 10000, and no of units sold deceases by 6%

Particulars Total(in $)   

Sales( 44000*.94*(7.3)) 301928

Less: Variable expenses(44000*.94*3)   124080

Contribution margin 177848

Less: Fixed expenses 50000

Net operating income 127848

4.Net operating income if selling price per unit increases by 20%, variable expenses increases by 10 cents per unit and no of units sold decreases by 14%

Particulars Total(in $)   

Sales( 44000*.86*(7.2)) 272448

Less: Variable expenses(44000*.86*3.1) 117304

Contribution margin 155144

Less: Fixed expenses 40000

Net operating income 115144