Question

Miller Company’s contribution format income statement for the most recent month is shown below: Total Per Unit Sales (20,000 units) $ 300,000 $ 15.00 Variable expenses 180,000 9.00 Contribution margin 120,000 $ 6.00 Fixed expenses 70,000 Net operating income $ 50,000 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 $1.50 per unit and the number of units sold increases by 25%? 3. What is the revised net operating income if the selling price increases by $1.50 per unit, fixed expenses increase by $20,000, and the number of units sold decreases by 5%? 4. What is the revised net operating income if the selling price per unit increases by 12%, variable expenses increase by 60 cents per unit, and the number of units sold decreases by 10%?

Answer 1

Answer:

Answers are 1.  $95.000  2. $42.500 3. $ 50.000 4. $59.600

Explanation:

In each case you have to replace the data with the given information

1 If unit sales increase 15%    

   

     Units   price   Total  

Revenue    20,000.00   17.25   345,000.00  

Variable Man    20,000.00   9.00   (180,000.00)

Contribution margin   20,000.00   8.25   165,000.00  

Fixed expenses    20,000.00   3.50   (70,000.00)

   

Net income       95,000.00  

   

2 If price decreases by $1.5 and units sold increases by 25%    

     Units   price   Total  

Revenue    25,000.00   13.50   337,500.00  

Variable Man    25,000.00   9.00   (225,000.00)

Contribution margin   25,000.00   4.50   112,500.00  

Fixed expenses    25,000.00   2.80   (70,000.00)

   

Net income       42,500.00  

   

   

3 If price increases by $1.5 and fixed expenses by $20.000    

     Units   price   Total  

Revenue    20,000.00   16.50   330,000.00  

Variable Man    20,000.00   9.00   (180,000.00)

Contribution margin   20,000.00   7.50   150,000.00  

Fixed expenses    20,000.00   5.00   (100,000.00)

   

Net income       50,000.00  

   

4     Units   price   Total  

Revenue   18,000.00   16.80   302,400.00  

Variable Man   18,000.00   9.60   (172,800.00)

Contribution margin  18,000.00   7.20   129,600.00  

Fixed expenses   18,000.00   3.89   (70,000.00)

   

Net income      59,600.00