Question

Miller Company's contribution format income statement for the most recent month is shown below. Sales (37,000 units) Variable expenses Contribution margin Fixed expenses Net operating income Total $ 333,000 222,000 111,000 46,000 $ 65,000 Per Unit $9.00 6.00 $ 3.00 Required: (Consider each case independently): 1. What is the revised net operating income if unit sales increase by 18%? 2. What is the revised net operating income if the selling price decreases by $1.40 per unit and the number of units sold increases by 18%? 3. What is the revised net operating income if the selling price increases by $1.40 per unit, fixed expenses increase by $6,000, 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 40 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

Answer

· Requirements

1	Net Operating Income	$84,980
2	Net Operating Income	$23,856
3	Net Operating Income	$97,776
4	Net Operating Income	$65,370

· Workings

		Current	Requirement 1	Requirement 2	Requirement 3	Requirement 4
A	Sale PRICE PER UNIT	$9.00	$9.00	$7.60	$10.40	$9.90
B	Variable cost per unit	$6.00	$6.00	$6.00	$6.00	$6.40
C = A-B	Contribution margin per unit	$3.00	$3.00	$1.60	$4.40	$3.50
D	Sales unit	37000	43660	43660	34040	31820
E = C x D	Total contribution margin	$111,000	$130,980	$69,856	$149,776	$111,370
F	Total Fixed expenses	$46,000	$46,000	$46,000	$52,000	$46,000
G = E - F	Net Operating Income	$65,000	$84,980	$23,856	$97,776	$65,370

		Current	Requirement 1	Requirement 2	Requirement 3	Requirement 4
A	Sale PRICE PER UNIT	9	9	=9-1.4	=9+1.4	=9+(9*10%)
B	Variable cost per unit	6	6	6	6	=6+0.4
D	Sales unit	37000	=37000+(37000*18%)	=37000+(37000*18%)	=37000-(37000*8%)	=37000-(37000*14%)
F	Total Fixed expenses	46000	46000	46000	=46000+6000	46000