Question

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

	Total			Per Unit
Sales (44,000 units)	$	440,000		$	10.00
Variable expenses		308,000			7.00
Contribution margin		132,000		$	3.00
Fixed expenses		41,000
Net operating income	$	91,000

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 $1.40 per unit and the number of units sold increases by 21%?

3. What is the revised net operating income if the selling price increases by $1.40 per unit, fixed expenses increase by $5,000, 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 20%, variable expenses increase by 30 cents per unit, and the number of units sold decreases by 13%?

Answer 1

1
	Total	Per unit
Sales (48400 units)	484000	10.00
Variable expenses	338800	7.00
Contribution margin	145200	3.00
Fixed expenses	41000
Net operating income	104200
2
	Total	Per unit
Sales (53240 units)	457864	8.60
Variable expenses	372680	7.00
Contribution margin	85184	1.60
Fixed expenses	41000
Net operating income	44184
3
	Total	Per unit
Sales (41800 units)	476520	11.40
Variable expenses	292600	7.00
Contribution margin	183920	4.40
Fixed expenses	46000
Net operating income	137920
4
	Total	Per unit
Sales (38280 units)	459360	12.00
Variable expenses	279444	7.30
Contribution margin	179916	4.70
Fixed expenses	41000
Net operating income	138916