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Exercise 5-13 (Algo) Changes in Selling Price, Unit Sales, Variable Cost per Unit, and Total...

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Accounting

Exercise 5-13 (Algo) Changes in Selling Price, Unit Sales, Variable Cost per Unit, and Total Fixed Costs [LO52, LO5-3, LO57]

Miller Companys contribution format income statement for the most recent month is shown below:

Total Per Unit
Sales (24,000 units) $ 144,000 $ 6.00
Variable expenses 86,400 3.60
Contribution margin 57,600 $ 2.40
Fixed expenses 33,600
Net operating income $ 24,000

Required:

(Consider each of the four requirements independently):

  1. Assume the sales volume increases by 3,840 units:
    1. What is the revised net operating income?
    2. What is the percent increase in unit sales?
    3. Using the most recent months degree of operating leverage, what is the percent increase in net operating income?
  2. What is the revised net operating income if the selling price decreases by $1.10 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 $1.10 per unit, fixed expenses increase by $7,000, and the number of units sold decreases by 3%?
  4. What is the revised net operating income if the selling price per unit increases by 20%, variable expenses increase by 20 cents per unit, and the number of units sold decreases by 6%?
image \begin{tabular}{|c|c|} \hline 1a. Net operating income & \\ \hline 1b. Percent increase in unit sales & % \\ \hline 1c. Percent increase in net operating income & % \\ \hline 2. Net operating income (loss) & \\ \hline 3. Net operating income & \\ \hline 4. Net operating income & \\ \hline \end{tabular}
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