Question

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

	Total			Per Unit
Sales (34,000 units)	$	238,000		$	7.00
Variable expenses		136,000			4.00
Contribution margin		102,000		$	3.00
Fixed expenses		44,000
Net operating income	$	58,000

Required:

(Consider each case independently):

1. What is the revised net operating income if unit sales increase by 17%?

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 18%?

3. What is the revised net operating income if the selling price increases by $1.40 per unit, fixed expenses increase by $6,000, and the number of units sold decreases by 8%?

4. What is the revised net operating income if the selling price per unit increases by 20%, variable expenses increase by 40 cents per unit, and the number of units sold decreases by 13%?

Answer 1

1.

	Total
Sales (34,000+17%) 39,780*$7	$278,460
Variable expenses (39,780*$4)	159,120
Contribution margin	119,340
Fixed expenses	44,000
Revised net operating income	$75,340

2.

	Total
Sales (34,000+18%) 40,120*$5.6	$224,672
Variable expenses (40,120*$4)	160,480
Contribution margin	64,192
Fixed expenses	44,000
Revised net operating income	$20,192

3.

	Total
Sales (34,000-8%) 31,280*$8.40	$262,752
Variable expenses (31,280*$4)	125,120
Contribution margin	137,632
Fixed expenses (44,000+6,000)	50,000
Revised net operating income	$87,632

4.

	Total
Sales (34,000-13%) 29,580*$8.4	$248,472
Variable expenses (29,580*$4.4)	130,152
Contribution margin	118,320
Fixed expenses	44,000
Revised net operating income	$74,320