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

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

	Total			Per Unit
Sales (45,000 units)	$	360,000		$	8.00
Variable expenses		225,000			5.00
Contribution margin		135,000		$	3.00
Fixed expenses		45,000
Net operating income	$	90,000

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 $1.20 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 $6,000, 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 20%, variable expenses increase by 10 cents per unit, and the number of units sold decreases by 13%?

 

 

Explanation

1.

	Total			Per Unit
Sales (45,000 units × 1.17 = 52,650 units)	$	421,200		$	8.00
Variable expenses		263,250			5.00
Contribution margin		157,950		$	3.00
Fixed expenses		45,000
Net operating income	$	112,950

2.

	Total			Per Unit
Sales (45,000 units × 1.21 = 54,450 units)	$	370,260		$	6.80
Variable expenses		272,250			5.00
Contribution margin		98,010		$	1.80
Fixed expenses		45,000
Net operating income	$	53,010

3.

 

	Total			Per Unit
Sales (45,000 units × 0.93 = 41,850 units)	$	385,020		$	9.20
Variable expenses		209,250			5.00
Contribution margin		175,770		$	4.20
Fixed expenses		51,000
Net operating income	$	124,770

4.

	Total			Per Unit
Sales (45,000 units × 0.87 = 39,150 units)	$	375,840		$	9.60
Variable expenses		199,665			5.10
Contribution margin		176,175		$	4.50
Fixed expenses		45,000
Net operating income	$	131,175