Miller Company\'s contribution format income statement for the most recent month
ID: 3196174 • Letter: M
Question
Miller Company's contribution format income statement for the most recent month is shown below: Sales (38,000 units) Variable expenses Contribution margin Fixed expenses Net operating income Total 342,000 228,000 114,000 40,000 Per Unit $9.00 6.00 $3.00 $ 74,000 Required Consider each case independently): 1, what is the revised net operating income if unit sales increase by 18%? 2. What is the revised net operating income if the selling price decreases by $1.30 per unit and the number of units sold increases by 2 2%? 3. What is the revised net operating income if the selling price increases by $1.30 per unit, fixed expenses increase by $6,000, and the number of units sold decreases by 4%? 4, what is the revised net operating income if the selling price per unit increases by 10%, variable expenses increase by 30 cents per unit, and the number of units sold decreases by 9%? 1. Net operating income 2. Net operating income 3. Net operating income 4. Net operating incomeExplanation / Answer
1) Unit sales = $342,000
Increase by 18% percent --> $342,000 + 18% of $342,000 = 342,000 + 18/100 x 342,000
= 342,000 + 0.18 x 342,000 = 1 x 342,000 + 0.18 x 342,000 = (1 + 0.18) x 342,000 = 1.18 x 342,000 = $403,560
Revised Net Operating Income = $403,560 - $228,000 - $40,000 = $135,560
2) Current Selling Price = $9 per unit
New Selling Price = 9 - 1.3 = $7.7 per unit
Current Number of units sold = 38,000
New Number of units sold = 38,000 + 22/100 x 38,000 = 1.22 x 38000 = 46,360
New Sales = 46360 x 7.7 = $356,972
New Net Operating Income = $356,972 - $228,000 - $40,000 = $88,972
3) Current Selling Price = $9 per unit
New Selling Price = 9 + 1.3 = $10.3 per unit
Current Fixed Expenses = $40,000
New Fixed Expenses = 40,000 + 6000 = $46,000
Current Number of units sold = 38,000
New Number of units sold = 38,000 - 4/100 x 38,000 = 0.96 x 38000 = 36,480
New Sales = 36,480 x 10.3 = $375,744
New Net Operating Income = $375,744 - $228,000 - $46,000 = $101,755
4) Current Selling Price = $9 per unit
New Selling Price = $9 + 10/100 x $9 = 1.1 x 9 = $9.9 per unit
Current Variables Expenses per unit = $228,000/38,000 = $6 per unit
New Variable Expenses per unit = $6 + $0.3 = $6.3 per unit
Current Number of units sold = 38,000
New Number of units sold = 38,000 - 9/100 x 38,000 = 0.91 x 38000 = 34,580
New Sales = 34,580 x 9.9 = $342,342
New Variable Expenses = 34,580 x 6.3 = 217,854
New Net Operating Income = $342,342 - $217,854 - $40,000 = $84,488
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