Question

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

	Total			Per Unit
Sales (37,000 units)	$	296,000		$	8.00
Variable expenses		185,000			5.00
Contribution margin		111,000		$	3.00
Fixed expenses		42,000
Net operating income	$	69,000

Required:

(Consider each case independently):

1. What is the revised net operating income if unit sales increase by 15%?

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 $9,000, and the number of units sold decreases by 6%?

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 8%?

Answer 1

1
	Total	Per unit
Sales (42,550 units)	340400	8.00
Variable expenses	212750	5.00
Contribution margin	127650	3.00
Fixed expenses	42000
Revised Net operating income	85650
2
	Total	Per unit
Sales (44,770 units)	295482	6.60
Variable expenses	223850	5.00
Contribution margin	71632	1.60
Fixed expenses	42000
Revised Net operating income	29632
3
	Total	Per unit
Sales (34,780 units)	326932	9.40
Variable expenses	173900	5.00
Contribution margin	153032	4.40
Fixed expenses	51000
Revised Net operating income	102032
4
	Total	Per unit
Sales (34,040 units)	299552	8.80
Variable expenses	177008	5.20
Contribution margin	122544	3.60
Fixed expenses	42000
Revised Net operating income	80544