Question

Miller Company's contribution format income statement for the most recent month is shown below: Total $ 264,000 132,000 132,000 46,000 $ 86,000 Per Unit $ 6.00 3.00 $ 3.00 Sales (44,000 units) Variable expenses Contribution margin Fixed expenses Net operating income 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 20%? 3. What is the revised net operating income if the selling price increases by $1.10 per unit, fixed expenses increase by $9,000, and the number of units sold decreases by 3%? 4. What is the revised net operating income if the selling price per unit increases by 10%, variable expenses increase by 10 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 Prey 1 of 3 Next >

Answer 1

Answer

1. If unit sales increas by 17%,

Units sales increases =44,000*17%=7,480 units

Increased units=44,000+7,480

Increased units=51,480 units

Net operating income=Sales-Variable expense-Fixed expense

=(51,480*6)-(51,480*3)-46,000

=308,880-154,440-46,000

Net operating income=$108,440

2

New selling price=6-1.1=$4.9

Unit sales increase by 20%

New units=44,000+44,000*20%

=44,000+8,800

Revised Units sold=52,800

Net operating income=Sales-variable epxense-Fixed expense

=(52,800*4.9)-(52,800*3)-46,000

=$2,58,720-$158,400-$46,000

Net operating income=$54,320

3

Revised selling prices=6+1.1=$7.1

Revised selling units=44,000-44,000*3%

=44,000-1,320

Revised selling units=42,680 units

Net operating income=Sales-Variable expense-Fixed expense

=(42,680*7.1)-(42,680*3)-55,000

=$303,028-$128,040-$55,000

Net oeprating income=$119,988

4

Selling price unit increase by 10%,

Revised selling price=6+6*10%=$6.6

Variable expense new price=$3.1

Revised units sold=44,000-44,000*12%

=44,000-5,280

Revised units sold=38,720

Net oeprating income=Sales-variable expense-Fixed expense

=38,720*6.6-38,720*3.1-46,000

=255,552-120,032-46,000

Net operating income=$89,520