Question

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%?

Answer 1

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

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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

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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 _____________________________________________________________________________