Question

Exercise 2-13 (Algo) Changes in Selling Price, Sales Volume, Variable Cost per Unit, and Total Fixed Costs [LO2-1, LO2-4] Miller Company’s contribution format income statement for the most recent month is shown below: Total Per Unit Sales (32,000 units) $ 320,000 $ 10.00 Variable expenses 224,000 7.00 Contribution margin 96,000 $ 3.00 Fixed expenses 50,000 Net operating income $ 46,000 Required: (Consider each case independently): 1. What is the revised net operating income if unit sales increase by 19%? 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 16%? 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 10 cents per unit, and the number of units sold decreases by 8%?

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

Answer Part 1) Revised net operating = current net operating income (1 + (operating leverage * increase in sales)) - 46000 (1+((96000/46000)*19%)) = 46000 ( 1.396522) = $ 64240 Thus the correct answer is $ 64240 5 Part 2) Revised net operating income = (no. of revised units sold * revised contribution margin) - fixed cost 1 = ((32000*1.16)*(3-1.2))-50000 2 = $ 16816 3 Thus the correct answer is $ 16816 5 Part 3) 6 Revised net operating income = (no. of revised units sold * revised contribution margin) - revised fixed cost 71 = ((32000*93%)*(3+1.2)) - (50000+9000) 3 = $ 65992 9 Thus the correct answer is $ 65992 1 Part 4) 2 Revised net operating income = (no. of revised units sold * revised contribution margin) - fixed cost 3 = ((32000*92%)*(11-7.1))-50000 4 = $ 64816 3 Thus the correct answer is $ 64816 6 For any help please comment in the comment box