Question

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

	Total			Per Unit
Sales (40,000 units)	$	280,000		$	7.00
Variable expenses		160,000			4.00
Contribution margin		120,000		$	3.00
Fixed expenses		43,000
Net operating income	$	77,000

Required:

(Consider each case independently):

1. What is the revised net operating income if unit sales increase by 12%?

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 21%?

3. What is the revised net operating income if the selling price increases by $1.20 per unit, fixed expenses increase by $5,000, 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 40 cents per unit, and the number of units sold decreases by 14%?

Answer 1

1
	Total	Per unit
Sales (44,800 units)	313600	7
Variable expenses	179200	4
Contribution margin	134400	3
Fixed expenses	43000
Revised net operating income	91400
2
	Total	Per unit
Sales (48,400 units)	280720	5.8
Variable expenses	193600	4
Contribution margin	87120	1.8
Fixed expenses	43000
Revised net operating income	44120
3
	Total	Per unit
Sales (37,200 units)	305040	8.2
Variable expenses	148800	4
Contribution margin	156240	4.2
Fixed expenses	48000
Revised net operating income	108240
4
	Total	Per unit
Sales (34,400 units)	264880	7.7
Variable expenses	151360	4.4
Contribution margin	113520	3.3
Fixed expenses	43000
Revised net operating income	70520