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

Total Per Unit
Sales (35,000 units) $280,000 $8.00
Variable expenses 175,000 5.00

Contribution margin 105,000 $3.00
Fixed expenses 41,000

Net operating income $ 64,000

Required:
Prepare a new contribution format income statement under each of the following conditions (consider each case independently): (Do not round intermediate calculations. Round your "Per unit" answers to 2 decimal places.)

1. The number of units sold increases by 13%.

2. The selling price decreases by $1.50 per unit, and the number of units sold increases by 23%.

3. The selling price increases by $1.50 per unit, fixed expenses increase by $8,000, and the number of units sold decreases by 3%.

4. The selling price increases by 20%, variable expenses increase by 10 cents per unit, and the number of units sold decreases by 5%.

1. The number of units increase by 13 %

Sales (39,550 units)   $ 316,400 $8.00

Variable expenses     $ 197,750 5.00

Contribution margin   $ 118,650  $3.00

Fixed expenses          $ 41,000

Net operating income $ 77,650

2. The selling price decreases by $1.50 per unit, and the number of units sold increases by 23%

Sales (43,050 units)   $ 279,825 $6.50

Variable expenses     $ 215,250 5.00

Contribution margin   $  64,575  $1.50

Fixed expenses          $  41,000

Net operating income $ 23,575

3. The selling price increases by $1.50 per unit, fixed expenses increase by $8,000, and the number of units sold decreases by 3%.

Sales (33,950 units)   $ 322,525 $9.50

Variable expenses     $ 169,750   $ 5.00

Contribution margin   $ 152,775   $  4.50

Fixed expenses          $  49,000

Net operating income $ 103,775

4. The selling price increases by 20%, variable expenses increase by 10 cents per unit, and the number of units sold decreases by 5%.

Sales (33,250 units)   $ 319,200 $9.60

Variable expenses     $ 169,575   $ 5.10

Contribution margin   $ 149,625   $ 4.50

Fixed expenses          $  41,000

Net operating income $ 108,625

Explanation:

For situation 1, we need to recalculate the no of units sold i.e.

35000 units * 113 % = 39,550 units, the rest of the information flows from the data in the question.

For situation 2, we need to recalculate the no of units sold i.e.

35000 units * 123 % = 43,050 units, we also need to change the selling price by $ 1.50 per unit, i.e.

$ 8 - $ 1.50 = $ 6.50 per unit

The rest of the information flows from the data in the question.

For situation 3, we need to make the following changes in the data assumptions.

Recalculate the no of units sold i.e. decrease of 3 %. so the new number of units are

35,000 units * 97 % = 33,950 units

increase in selling price by $ 1.50 per unit, thus the new selling price is

$ 8 + $ 1.50 per unit = $ 9.50 per unit

Increase in Fixed expense by $ 8,000, so the revised fixed costs are

$ 41,000 + $ 8,000 = $ 49,000

For situation 4 we need to make the following changes in the data assumptions.

Recalculate the no of units sold i.e. decrease of 5 %. so the new number of units are

35,000 units * 95 % = 33,250 units

increase in selling price by 20% per unit, thus the new selling price is

$ 8 * 120 %+  = $ 9.60 per unit

Increase in variable costs per unit by $ 0.10 per unit so the new variable cost is $ 5 + $ 0.10 = $5.10 per  unit

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