Question

Miller Company’s contribution format income statement for the most recent month is shown below:

	Total			Per Unit
Sales (34,000 units)	$	340,000		$	10.00
Variable expenses		238,000			7.00
Contribution margin		102,000		$	3.00
Fixed expenses		46,000
Net operating income	$	56,000

Required:

(Consider each case independently):

1. What is the revised net operating income if unit sales increase by 15%?

2. What is the revised net operating income if the selling price decreases by $1.20 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 $1.20 per unit, fixed expenses increase by $7,000, and the number of units sold decreases by 5%?

4. What is the revised net operating income if the selling price per unit increases by 20%, variable expenses increase by 30 cents per unit, and the number of units sold decreases by 8%?

3. What is the revised net operating income if the selling price number of units sold decreases by 5%? 4. What is the revised net operating income if the selling price unit, and the number of units sold decreases by 8%? Answer is complete but not entirely correct. Net operating $71,300 S 14,216 $ 82,660 69,736 1. income 2. Net operating 3. Net operating 4. Net operating income income K Pre

Answer 1

Ans:

1. The revised net operating income if unit sales increase by 15%

Particulars	Per unit	Total
Units		39,100 units
34,000 units*115%
Sales revenue	$10.00	$  391,000
39,100 units*$10
Less: Variable expenses	$7.00	$ 273,700
39,100units*$7
Contribution margin	$3.00	$ 117,300
Less: Fixed expenses		$ 46,000
Net operating income		$ 71,300

2. The revised net operating income if the selling price decreases by $1.20 per unit and the number of units sold increases by 18%

Particulars	Per unit	Total
Units		40,120 units
34,000 units*118%
Sales revenue (10-1.2)	$8.8	$  353,056
40,120 units*$8.8
Less: Variable expenses	$7.00	$ 280,840
40,120 units*$7
Contribution margin	$1.8	$ 72,216
Less: Fixed expenses		$ 46,000
Net operating income		$ 26,216

3.The revised net operating income if the selling price increases by $1.20 per unit, fixed expenses increase by $7,000, and the number of units sold decreases by 5%

Particulars	Per unit	Total
Units		32,300 units
34,000 units*95%
Sales revenue (10+1.2)	$11.2	$  361,760
32,300 units*$11.2
Less: Variable expenses	$7.00	$ 226,100
32,300 units*$7
Contribution margin	$4.2	$ 135,660
Less: Fixed expenses (46,000+7,000)		$ 53,000
Net operating income		$ 82,660

4.The revised net operating income if the selling price per unit increases by 20%, variable expenses increase by 30 cents per unit, and the number of units sold decreases by 8%

Particulars	Per unit	Total
Units		31,280 units
34,000 units*92%
Sales revenue ($10*120%)	$12	$  375,360
31,280 units*$12
Less: Variable expenses	$7.3	$ 228,344
31,280 units*$7.3
Contribution margin	$4.7	$ 147,016
Less: Fixed expenses		$ 46,000
Net operating income		$ 101,016