Question

Shown here are condensed income statements for two different companies (assume no income taxes) 

5. What happens to each company's net income if sales decrease by 30%?

Answer 1

Company	Net Income
Miller Company	Decrease by	41%
Weaver Company	Decrease by	82%
Workings:
Miller Company
	Current	Sales Decrease by 30%	Net dollar Change	Percentage
Sales	$       13,50,000	$       9,45,000	$       -4,05,000	-30%
Variable expense	$       10,80,000	$       7,56,000	$       -3,24,000	-30%
Income before interest	$          2,70,000	$       1,89,000	$           -81,000	-30%
Interest Income Fixed	$             72,000	$           72,000	$                      -	0%
Net Income	$          1,98,000	$       1,17,000	$           -81,000	-41%
Weaver Company
	Current	Sales Decrease by 30%	Net Change	Percentage
Sales	$       13,50,000	$       9,45,000	$       -4,05,000	-30%
Variable expense	$          8,10,000	$       5,67,000	$       -2,43,000	-30%
Income before interest	$          5,40,000	$       3,78,000	$       -1,62,000	-30%
Interest Income Fixed	$          3,42,000	$       3,42,000	$                      -	0%
Net Income	$          1,98,000	$           36,000	$       -1,62,000	-82%