Question

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

Miller Company’s contribution format income statement for the most recent month is shown below: Total Per Unit Sales (41,000 units) \$ 246,000 \$ 6.00 Variable expenses 123,000 3.00 Contribution margin 123,000 \$ 3.00 Fixed expenses 44,000 Net operating income \$ 79,000 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 \$1.10 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 \$1.10 per unit, fixed expenses increase by \$6,000, and the number of units sold decreases by 4%? 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 8%?

1. What is the revised net operating income if unit sales increase by 11%?

The number of units sold increases by 11%.

Revised number of units

=41000+ (41000x11%)

=45,510 units

 Total Per unit sales (45,5510 unitsx6). 273060 6 Variable expenses. (45,510 unitsx3) 136530 3 CM 136530 3 Fixed expense. 44000 Revised Net operating income 92530

Revised Net operating income =\$92,530

________________________________________________________________________________

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 18%?

Revised selling price

=6-1.10

=4.9

Revised number of units

=41000+ (41000x18%)

=48,380 units

 Total Per unit sales (48,380 units x 4.9). 237062 4.9 Variable expenses. 145140 3 CM 91922 1.9 Fixed expense. 44000 Revised Net operating income 47922

Revised Net operating income =\$47,922

________________________________________________________________________________

3. What is the revised net operating income if the selling price increases by \$1.10 per unit, fixed expenses increase by \$6,000, and the number of units sold decreases by 4%?

Revised selling price

=6 +1.10

=7.10

Revised number of units

=41000- (41000x4%)

=39,360 units

 Total Per unit sales (39,360 units x 7.1). 279456 7.1 Variable expenses. (39,360 units x 3). 118080 3 CM 161376 4.1 Fixed expense. (44000+6000) 50000 Revised Net operating income 111376

Revised Net operating income=111,376 _____________________________________________________________________________

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 8%?

Revised selling price

=6 +(6*20%)

=7.2

Revised variable cost

=3+(3*40%)

=4.2

Revised number of units

=41000- (41000x8%)

=37,720 units

 Total Per unit sales (37720 units x 7.2). 271584 7.2 Variable expenses. (37720 units x 4.2) 158424 4.2 CM 113160 3 Fixed expense. 44000 Revised Net operating income 69160

Revised Net operating income=69,160 _____________________________________________________________________________

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