Miller Company’s contribution format income statement for the most recent month is shown below:
Total | Per Unit | |||||
Sales (34,000 units) | $ | 238,000 | $ | 7.00 | ||
Variable expenses | 136,000 | 4.00 | ||||
Contribution margin | 102,000 | $ | 3.00 | |||
Fixed expenses | 44,000 | |||||
Net operating income | $ | 58,000 | ||||
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 $1.40 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 20%, variable expenses increase by 40 cents per unit, and the number of units sold decreases by 13%?
1.
Total | |
Sales (34,000+17%) 39,780*$7 | $278,460 |
Variable expenses (39,780*$4) | 159,120 |
Contribution margin | 119,340 |
Fixed expenses | 44,000 |
Revised net operating income | $75,340 |
2.
Total | |
Sales (34,000+18%) 40,120*$5.6 | $224,672 |
Variable expenses (40,120*$4) | 160,480 |
Contribution margin | 64,192 |
Fixed expenses | 44,000 |
Revised net operating income | $20,192 |
3.
Total | |
Sales (34,000-8%) 31,280*$8.40 | $262,752 |
Variable expenses (31,280*$4) | 125,120 |
Contribution margin | 137,632 |
Fixed expenses (44,000+6,000) | 50,000 |
Revised net operating income | $87,632 |
4.
Total | |
Sales (34,000-13%) 29,580*$8.4 | $248,472 |
Variable expenses (29,580*$4.4) | 130,152 |
Contribution margin | 118,320 |
Fixed expenses | 44,000 |
Revised net operating income | $74,320 |
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