Question

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

	Total			Per Unit
Sales (33,000 units)	$	297,000		$	9.00
Variable expenses		198,000			6.00
Contribution margin		99,000		$	3.00
Fixed expenses		43,000
Net operating income	$	56,000

Required:

(Consider each case independently):

1. What is the revised net operating income if unit sales increase by 16%?

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 19%?

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 5%?

4. What is the revised net operating income if the selling price per unit increases by 10%, variable expenses increase by 40 cents per unit, and the number of units sold decreases by 7%?

Answer 1

1.

	Total
Sales (33,000+16%)= 38,280*$9	$344,520
Variable expenses (38,280*$6)	229,680
Contribution margin	114,840
Fixed expenses	43,000
Revised net operating income	$71,840

2.

	Total
Sales (33,000+19%) 39,270*$7.6	$298,452
Variable expenses (39,270*$6)	235,620
Contribution margin	62,832
Fixed expenses	43,000
Revised net operating income	$19,832

3.

	Total
Sales (33,000-5%) 31,350*$10.4	$326,040
Variable expenses (31,350*$6)	188,100
Contribution margin	137,940
Fixed expenses (43,000+6,000)	49,000
Revised net operating income	$88,940

4.

	Total
Sales (33,000-7%) 30,690*$9.9	$303,831
Variable expenses (30,690*$8.4)	257,796
Contribution margin	46,035
Fixed expenses	43,000
Revised net operating income	$3,035