PROBLEM 7. Mcoy Company has, for the coming year, budgeted sales of P3,200,000 with contribution margin of 60 percent and fixed costs of P1,200,000. The company's only one product line sells for P80. The company is subject to 40 percent tax bracket. 4. The operations manager believes that the variable cost will increase to P34 per unit. The sales manager believes the selling price can be increased. What is the new selling price that will give the same contribution margin ratio of 60%? 5. Assume that the amount of total fixed cost increases by 15%. What is the effect of this increase on each of the following? a. Break-even sales volume b. Before-tax profit Contribution margin d. Required sales to earn same amount of profit C.

PROBLEM 7. Mcoy Company has, for the coming year, budgeted sales of P3,200,000 with contribution margin of 60 percent and fixed costs of P1,200,000. The company's only one product line sells for P80. The company is subject to 40 percent tax bracket. 4. The operations manager believes that the variable cost will increase to P34 per unit. The sales manager believes the selling price can be increased. What is the new selling price that will give the same contribution margin ratio of 60%? 5. Assume that the amount of total fixed cost increases by 15%. What is the effect of this increase on each of the following? a. Break-even sales volume b. Before-tax profit Contribution margin d. Required sales to earn same amount of profit C.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...

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Hammond Company runs a driving range and golf shop. The budgeted income statement for the coming year is as follows. Required: 1. What is Hammonds variable cost ratio? Its contribution margin ratio? 2. Suppose Hammonds actual revenues are 200,000 greater than budgeted. By how much will before-tax profits increase? Give the answer without preparing a new income statement. 3. How much sales revenue must Hammond earn in order to break even? What is the expected margin of safety? (Round your answers to the nearest dollar.) 4. How much sales revenue must Hammond generate to earn a before-tax profit of 130,000? An after-tax profit of 90,000? (Round your answers to the nearest dollar.) Prepare a contribution margin income statement to verify the accuracy of your last answer.
Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000
Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?
XYZ Inc. sells 3 products: X, Y and Z. Budgeted Fixed Cost for next period totals P106,500. Other projected data are as follows: Selling Variable Cost Price Sales Product Volume (Units) 16,000 12,000 52,000 P14 P9 Y 10 6 11 How many units of product Y must be sold in order for the firm to earn operating income of P85,200?
PROBLEM 6. After its cost structure (variable costs P15 per unit and monthly fixed costs of P125,000),as well as potential market, Babaero Company established what it considered to be a reasonable selling price. The company expected to sell 20,000 units per month and planned its monthly results as follows: Sales @P25 Less: Variable costs @P15 Contribution margin P500,000 (300,000) 200,000 (125,000) 75,000 { 30.000) P 45,000 Less: Fixed costs Income before taxes Less: Income taxes Net income Requirements: On the basis of the preceding information, answer the following independent questions. 2 If the company determined that a particular advertising campaign had a high probability of increasing sales by 8,000 units, how much could it pay for such a campaign without reducing its planned profits?
PROBLEM 6. After its cost structure (variable costs P15 per unit and monthly fixed costs of P125,000),as well as potential market, Babaero Company established what it considered to b a reasonable selling price. The company expected to sell 20,000 units per month and planned its monthly results as follows: Sales @P25 Less: Variable costs @P15 Contribution margin P500,000 [300,000) 200,000 (125,000) 75,000 ( 30,000) P 45,000 Less: Fixed costs Income before taxes Less: Income taxes Net incom 7. If the company wants an after-tax profit of P60,000 on its expected sales volume of 20,000 units, what price must it charge? 8. The company is considering offering its salespeople a 5% commission on sales. What would the total sales, in pesos, have to be in order to implement the commission plan and still earn the planned before-tax income of P75,000? 9. If the company wants its before tax profit higher than the planned P75,000 by P15,000, compute the required increase in peso sales.
PROBLEM 6. After its cost structure (variable costs P15 per unit and monthly fixed costs of P125,000),as well as potential market, Babaero Company established what it considered to b a reasonable selling price. The company expected to sell 20,000 units per month and planned its monthly results as follows: Sales @P25 Less: Variable costs @P15 Contribution margin P500,000 [300,000) 200,000 (125,000) 75,000 ( 30,000) P 45,000 Less: Fixed costs Income before taxes Less: Income taxes Net income 4. If the company wants a 20% before-tax return on sales, what level of sales, in pesos, does it need? 5. If the company wants a P60,000 after-tax profit, how many units must it sell? 6. If the company wants an after-tax return on sales of 10.5%, how many units must it sell?
PROBLEM 6. After its cost structure (variable costs P15 per unit and monthly fixed costs of P125,000),as well as potential market, Babaero Company established what it considered to be a reasonable selling price. The company expected to sell 20,000 units per month and planned its monthly results as follows: Sales @P25 Less: Variable costs @P15 Contribution margin Less: Fixed costs P500,000 (300,000) 200,000 (125.000) 75,000 Income before taxes ( 30,000) P 45,000 Less: Income taxes Net income Requirements: On the basis of the preceding information, answer the following independent questions. 1. What is the break-even point in units? If the company determined that a particular advertising campaign had a high probability of increasing sales by 8,000 units, how much could it pay for such a campaign without reducing its planned profits? 3. If the company wants a P90,000 before-tax profit, how many units must it sell? 2
XYZ Company are shown below: Per Unit Percent of Sales Selling price P1,500 100% Variable expenses 1,050 70% Contribution margin P450 30% Fixed expenses are P45,000 per month and the company is selling 200 units per month. Required: a. The marketing manager argues that a P10,000 increase in the monthly advertising budget would increase monthly sales by P45,000. Should the advertising budget be increased? (support your answer with computations) b. Refer to the original data. Management is considering using better quality of materials that would increase the variable cost by P75 per unit. The marketing manager believes the higher-quality product would increase sales by 10% per month. Should the better quality of materials be used? (support your answer with computations)
Boss Enterprises currently sells its products for $30 per unit. Management is contemplating a 40% increase in the selling price for the next year. Variable costs are currently 40% of sales revenue and are not expected to change next year. Fixed expenses are $126,000 per year. What is the breakeven point in units at the current selling price? O A. 18 units ов. 10,500 units O C. 3,000 units O D. 7,000 units
Star corp. plans to sell 200,000 units of product A with a selling price of Rp 2,500 / unit in the 20x9 fiscal year. Profit contribution is estimated at 60% of sales revenue. At the level of sales volume of 100,000 units the company is at break even.Question: a. How much is the fixed cost? b. How much profit or loss on sales is budgeted? c. What is the variable cost per unit? d. What is the sales revenue at break-even?
PROBLEM 5. Austin Company produces a single product. The projected income statement for the coming year follows: Sales (50,000@P40) Variable costs Contribution margin P2,000,000 (1,100,000) 900,000 (765,000) P135,000 Fixed costs Operating income Assume the tax rate is 40 percent. How many units must be sold to earn an after-tax profit of P180,000? 8. What is the selling price that Austin must charge to raise the operating profit by 50 percent based on the given cost structure, still selling 50,000. 7.