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		45,000
Net operating income	$	54,000

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 $1.10 per unit and the number of units sold increases by 17%?

3. What is the revised net operating income if the selling price increases by $1.10 per unit, fixed expenses increase by $10,000, 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 20%, variable expenses increase by 40 cents per unit, and the number of units sold decreases by 7%?

Thanks

Answer 1

Miller Company Requirement 1 Total Per Unit Sales (38,940 units) Variable expenses 272580 7 155760 4 Contribution margin 116820 Fixed expenses 45000 Net operating income 71820 Requirement 2 Total Per Unit Sales (38,610 units) 227799 5.9 Variable expenses 154440 Contribution margin 73986 1.9 Fixed expenses 45000 Net operating income 28986 Requirement 3 Total Per Unit Sales (32,010 units) 259281 8.1 Variable expenses 128040 Contribution margin 159654 4.1 Fixed expenses 55000 Net operating income 104654 Requirement 4 Total Per Unit Sales (30,690 units) 257796 8.4 Variable expenses 135036 4.4 Contribution margin Fixed expenses 155760 4. 45000 110760 Net operating income