Question

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

	Total			Per Unit
Sales (43,000 units)	$	344,000		$	8.00
Variable expenses		215,000			5.00
Contribution margin		129,000		$	3.00
Fixed expenses		44,000
Net operating income	$	85,000

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 $1.20 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 $1.20 per unit, fixed expenses increase by $7,000, and the number of units sold decreases by 8%?

4. What is the revised net operating income if the selling price per unit increases by 20%, variable expenses increase by 20 cents per unit, and the number of units sold decreases by 8%?

Answer 1

1)

Sales units = 43,000 units + 14% = 49,020 units

Net operating income = (49,020 X $3) - $44,000 = $103,060

2)

Units sold = 43,000 units + 22% = 52,460 units

Net operating income = [52,460 X ($3 - $1.20)] - $44,000 = $50,428

3)

Units sold = 43,000 units - 8% = 39,560 units

Net operating income = [39,560 X ($3 + $1.20)] - $44,000 - $7,000 = $115,152

4)

Units sold = 43,000 units - 8% = 39,560 units

Selling price Per unit = $8 + 20% = $9.60

Variable cost Per unit = $5 + 20% = $6

Net operating income = [39,560 X ($9.60 - $6)] - $44,000 = $98,416