Question

Exercise 6-13 Changes in Selling Price, Sales Volume, Variable Cost per Unit, and Total Fixed Costs [LO6-1, LO6-4]

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

	Total			Per Unit
Sales (42,000 units)	$	294,000		$	7.00
Variable expenses		168,000			4.00
Contribution margin		126,000		$	3.00
Fixed expenses		46,000
Net operating income	$	80,000

Required:

(Consider each case independently):

1. What is the revised net operating income if unit sales increase by 14%?

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 24%?

3. What is the revised net operating income if the selling price increases by $1.40 per unit, fixed expenses increase by $10,000, and the number of units sold decreases by 7%?

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 13%?

1	Net Operating Income
2	Net Operating Income
3	Net Operating Income
4	Net Operating Income

Answer 1

1	Net operating income	97,640
2	Net operating income	37,328
3	Net operating income	115,864
4	Net operating income	59966

1.

	Total	Per unit
sales ( 47880 units X 7)	335160	7
variable expenses	191520	4
Contribution margin	143640	3
Fixed expenses	46000
Net operating income	97640
2.
	Total	Per unit
sales ( 52080 units X 5.6)	291648	5.6
variable expenses	208320	4
Contribution margin	83328	1.6
Fixed expenses	46000
Net operating income	37328
3.
	Total	Per unit
sales ( 39060 units X 8.4)	328104	8.4
variable expenses	156240	4
Contribution margin	171864	4.4
Fixed expenses	56000
Net operating income	115864
4.
	Total	Per unit
sales ( 36540 units X 7.7)	281358	7.7
variable expenses	175392	4.8
Contribution margin	105966	2.9
Fixed expenses	46000
Net operating income	59966