Question

Exercise 5-13 Changes in Selling Price, Sales Volume, Variable Cost per Unit, and Total Fixed Costs [LO5-1, LO5-4] Miller Company’s contribution format income statement for the most recent month is shown below: Total Per Unit Sales (31,000 units) $ 248,000 $ 8.00 Variable expenses 155,000 5.00 Contribution margin 93,000 $ 3.00 Fixed expenses 42,000 Net operating income $ 51,000 Required: (Consider each case independently): 1. What is the revised net operating income if unit sales increase by 10%? 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 20%? 3. What is the revised net operating income if the selling price increases by $1.20 per unit, fixed expenses increase by $9,000, 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 30 cents per unit, and the number of units sold decreases by 10%?

1.	Net operating income
2.	Net operating income
3.	Net operating income
4.	Net operating income

Answer 1

1	Revised unit sales(31000*110%)	34,100
	Sales(34500)	2,72,800	8
	Variable cost	1,72,500	5
	Contribution	1,00,300	3
	Fixed expenses	42,000
	Net operating income	58,300
2	Revised unit sales(31000*120%)	37,200
	Revised Selling Price(8-1.2)	6.80
	Sales(37200)	2,52,960	6.80
	Variable cost	1,86,000	5
	Contribution	66,960	1.80
	Fixed expenses	42,000
	Net operating income	24,960
3	Revised unit sales(31000*93%)	28,830
	Revised Selling Price(8 + 1.2)	9.20
	Fixed expenses(42000+9000)	51,000
	Sales(28800)	2,65,236	9.20
	Variable cost	1,44,150	5
	Contribution	1,21,086	4.20
	Fixed expenses	51,000
	Net operating income	70,086
4	Revised unit sales(31000*90%)	27,900
	Revised Selling Price(8 +0.8)	8.08
	Variable expenses(5*130%)	6.50
	Sales(28800)	2,25,432	8.08
	Variable cost	1,81,350	6.50
	Contribution	44,082	1.58
	Fixed expenses	42,000
	Net operating income	2,082