Question

Miller Company's contribution format income statement for the most recent month is shown below: Sales (43,000 units) Variable expenses Contribution margin Fixed expenses Net operating income Total $ 301,000 172,000 129,000 49,000 $ 80,000 Per Unit $ 7.00 4.00 $ 3.00 Required: (Consider each case independently): 1. What is the revised net operating income if unit sales increase by 12%? 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 20%? 3. What is the revised net operating income if the selling price increases by $1.30 per unit, fixed expenses increase by $8,000, and the number of units sold decreases by 4%? 4. What is the revised net operating income if the selling price per unit increases by 10%, 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

1) Calculate net operating income

	Total	Per unit
Sales (43000*1.12)	337120	7
Variable cost	192640	4
Contribution margin	144480	3
Fixed cost	49000
Net operating income	95480

2) Calculate net operating income

	Total	Per unit
Sales (43000*1.2)	294120	5.7
Variable cost	206400	4
Contribution margin	87720	1.7
Fixed cost	49000
Net operating income	38720

3) Calculate net operating income

	Total	Per unit
Sales (43000*0.96)	342624	8.3
Variable cost	165120	4
Contribution margin	177504	4.3
Fixed cost	57000
Net operating income	120504

4) Calculate net operating income

	Total	Per unit
Sales (43000*0.88)	291368	7.70
Variable cost	162712	4.30
Contribution margin	128656	3.40
Fixed cost	49000
Net operating income	79656