Question

Miller Company’s contribution format income statement for the most recent month is shown below: Total Per Unit Sales (33,000 units) $ 231,000 $ 7.00 Variable expenses 132,000 4.00 Contribution margin 99,000 $ 3.00 Fixed expenses 42,000 Net operating income $ 57,000

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 $1.10 per unit and the number of units sold increases by 21%?

3. What is the revised net operating income if the selling price increases by $1.10 per unit, fixed expenses increase by $8,000, and the number of units sold decreases by 8%?

4. What is the revised net operating income if the selling price per unit increases by 10%, variable expenses increase by 20 cents per unit, and the number of units sold decreases by 11%?

Can you please provide an explanation of where you get your numbers and what we should multiple or add? Thank you!

Answer 1

All the details regarding computation are provided in the details column which is as below:

1		Total	Per unit	Details
	Unit sales (33000 +12% = 36960)	258720	7	36960*7
	Variable expenses	147840	4	132000*1.12
	Contribution margin	110880	3
	Fixed expenses	42000
	Net operating income	68880
2		Total	Per unit	Details
	Unit sales (33000 +21% = 39930)	235587	7-1.1 = 5.9	39930*5.9
	Variable expenses	159720	4	132000*1.21
	Contribution margin	75867	1.9
	Fixed expenses	42000
	Net operating income	33867
3		Total	Per unit	Details
	Unit sales (33000 -8% = 30,360 )	245916	7+1.1=8.1	30,360*8.1
	Variable expenses	121440	4	132000*0.92
	Contribution margin	124476	4.1
	Fixed expenses	50,000		42000+8000
	Net operating income	74476
4		Total	Per unit	Details
	Unit sales (33000 -11% = 29,370 )	226149	7*1.1 = 7.7	29370*7.7
	Variable expenses	123354	4.2	29370*4.2
	Contribution margin	102795	3.5
	Fixed expenses	42,000		42000+8000
	Net operating income	60795