Miller Company’s most recent contribution format income statement is shown below
ID: 2492812 • Letter: M
Question
Miller Company’s most recent contribution format income statement is shown below: Total Per Unit Sales (32,000 units) $224,000 $7.00 Variable expenses 128,000 4.00 Contribution margin 96,000 $3.00 Fixed expenses 48,000 Net operating income $ 48,000 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 $1.40 per unit, and the number of units sold increases by 19%. 3. The selling price increases by $1.40 per unit, fixed expenses increase by $10,000, and the number of units sold decreases by 7%. 4. The selling price increases by 10%, variable expenses increase by 10 cents per unit, and the number of units sold decreases by 5%.
Explanation / Answer
Current Number of Units 32000 per unit total selling price 7 224000 variable cost 4 128000 Contribution margin 3 96000 Fixed expenses 48000 Net operating income 48000 scenario 1 Number of units increase by 13% Number of Units 36160 per unit total selling price 7 253120 variable cost 4 144640 Contribution margin 3 108480 Fixed expenses 48000 Net operating income 60480 scenario 2 Number of units increase by 19%, selling price decreases by $ 1.40 Number of Units 38080 per unit total selling price 5.6 213248 variable cost 4 152320 Contribution margin 1.6 60928 Fixed expenses 48000 Net operating income 12928 scenario 3 Number of units decrease by 7%, selling price increases by $ 1.40, fixed expenses increase by $ 10000 Number of Units 29760 per unit total selling price 8.4 249984 variable cost 4 119040 Contribution margin 4.4 130944 Fixed expenses 58000 Net operating income 72944 scenario 4 Number of units decreases by 5%, selling price increases by 10%, variable expenses increase by $ 0.10 Number of Units 30400 per unit total selling price 7.7 234080 variable cost 3.9 118560 Contribution margin 3.8 115520 Fixed expenses 48000 Net operating income 67520