Question

Miller Company’s contribution format income statement for the most recent month is shown below: Total Per Unit Sales (32,000 units) $ 192,000 $ 6.00 Variable expenses 96,000 3.00 Contribution margin 96,000 $ 3.00 Fixed expenses 45,000 Net operating income $ 51,000 Required: (Consider each case independently): 1. What is the revised net operating income if unit sales increase by 13%? 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 18%? 3. What is the revised net operating income if the selling price increases by $1.20 per unit, fixed expenses increase by $8,000, 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 10%?

Answer 1

Answer-

1	Net operating income	$63480
2	Net operating income	$22968
3	Net operating income	$73336
4	Net operating income	$41400

Explanation-

Miller Company
Operating income
Particulars		Amount $
Sales	(32000 units*1.13)*$6 per unit	216960
Less:- Variable cost	36160 units*$3 per unit	108480
Contribution		108480
Less:- Fixed costs		45000
Net operating income		63480
Miller Company
Operating income
Particulars		Amount $
Sales	(32000 units*1.18)*($6 per unit-$1.20 per unit)	181248
Less:- Variable cost	37760 units*$3 per unit	113280
Contribution		67968
Less:- Fixed costs		45000
Net operating income		22968
Miller Company
Operating income
Particulars		Amount $
Sales	(32000 units*94%)*($6 per unit+$1.20 per unit)	216576
Less:- Variable cost	28200 units*$3 per unit	90240
Contribution		126336
Less:- Fixed costs	(45000+8000)	53000
Net operating income		73336
Miller Company
Operating income
Particulars		Amount $
Sales	(32000 units*90%)*($6 per unit*1.10)	190080
Less:- Variable cost	28800 units*($3 per unit*1.20)	103680
Contribution		86400
Less:- Fixed costs		45000
Net operating income		41400