Question

Miller Company’s contribution format income statement for the most recent month is shown below: Total Per Unit Sales (36,000 units) $ 216,000 $ 6.00 Variable expenses 108,000 3.00 Contribution margin 108,000 $ 3.00 Fixed expenses 49,000 Net operating income $ 59,000 Required: (Consider each case independently): 1. What is the revised net operating income if unit sales increase by 11%? 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 22%? 3. What is the revised net operating income if the selling price increases by $1.40 per unit, fixed expenses increase by $9,000, 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 10%, variable expenses increase by 20 cents per unit, and the number of units sold decreases by 11%? 1. Net operating income $70,880 2. Net operating income 3. Net operating income 4. Net operating income $59,936 I need # 2 & 3

Answer 1

2.

Selling price per unit = $6 - $1.4 = $4.6

Units sold = 36,000 + (36,000 * 22%) = 36,000 + 7,920 = 43,920

Sales revenue (43,920 units * $4.6 per unit)	$202,032
Variable expenses (43,920 units * $3 per unit)	($131,760)
Contribution margin	$70,272
Fixed expenses	($49,000)
Net operating income	$21,272

Net operating income = $21,271

3.

Selling price per unit = $6 + $1.4 = $7.4

Fixed expenses = $49,000 + $9,000 = $58,000

Units sold = 36,000 - (36,000 * 3%) = 36,000 - 1,080 = 34,920

Sales revenue (34,920 units * $7.4 per unit)	$258,408
Variable expenses (34,920 units * $3 per unit)	($104,760)
Contribution margin	$153,648
Fixed expenses	($58,000)
Net operating income	$95,648

Net operating income = $95,648