Miller Company’s contribution format income statement for the most recent month is shown below: Total Per Unit Sales (30,000 units) $ 240,000 $ 8.00 Variable expenses 150,000 5.00 Contribution margin 90,000 $ 3.00 Fixed expenses 46,000 Net operating income $ 44,000 Required: (Consider each case independently): 1. What is the revised net operating income if unit sales increase by 11%? 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 $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 40 cents per unit, and the number of units sold decreases by 9%?

Miller Company

1. The revised net operating income if unit sales increase by 11%:

= $ 53,900

2. The revised net operating income if the selling price decreases by $1.20 per unit and the number of units sold increases by 21%:

= $ 50,840

3. 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%:

= $ 51,680

4. The revised net operating income if the selling price per unit increases by 10%, variable expenses increase by 40% per unit, and the number of units sold decreases by 9%:

= $ 3,140

Explanation:

a) Data and Calculations:

                                           Total       Per Unit

Sales (30,000 units)   $ 240,000      $ 8.00

Variable expenses         150,000         5.00

Contribution margin       90,000       $ 3.00

Fixed expenses              46,000

Net operating income $ 44,000

1. The revised net operating income if unit sales increase by 11%:

Unit sales = 33,300 (30,000 * 1.11)

                                           Total       Per Unit

Sales (33,300 units)   $ 266,400      $ 8.00

Variable expenses         166,500         5.00

Contribution margin       99,900       $ 3.00

Fixed expenses              46,000

Net operating income $ 53,900

2. The revised net operating income if the selling price decreases by $1.20 per unit and the number of units sold increases by 21%:

Selling price = $6.80 ($8.00 - $1.20)

Unit sales = 36,300 (30,000 * 1.21)

                                           Total       Per Unit

Sales (36,300 units)   $ 246,840      $ 6.80

Variable expenses         150,000         5.00

Contribution margin       96,840       $ 3.00

Fixed expenses              46,000

Net operating income $ 50,840

3. 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%:

Selling price = $9.20 ($8.00 + $1.20)

Fixed expenses = $55,000 ($46,000 + $9,000)

Unit sales = 27,900 (30,000 * (1 - 0.07)

                                           Total       Per Unit

Sales (27,900 units)   $ 256,680      $ 9.20

Variable expenses         150,000         5.00

Contribution margin      106,680       $ 3.00

Fixed expenses              55,000

Net operating income $ 51,680

4. The revised net operating income if the selling price per unit increases by 10%, variable expenses increase by 40% per unit, and the number of units sold decreases by 9%:

Selling price = $8.80 ($8.00 * 1.1)

Variable expenses = $7.00 ($5.00 * 1.4)

Unit sales = $27,300 (30,000 * (1 - 0.09)

                                           Total       Per Unit

Sales (27,300 units)   $ 240,240      $ 8.80

Variable expenses           191,100         7.00

Contribution margin         49,140     $ 3.00

Fixed expenses              46,000

Net operating income    $ 3,140

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