CPL contemplates a change in technology that would reduce fixed costs from P 800,000 to P 700,000. However, the ratio of variable costs to sales will increase from 68% to 80%. What will happen to breakeven level of revenues? A. Decrease by P 301,470.50 B. Decrease by P 500,000 C. Decrease by P 1,812,500 D. Increase by P 1,000,000

CPL contemplates a change in technology that would reduce fixed costs from P 800,000 to P 700,000. However, the ratio of variable costs to sales will increase from 68% to 80%. What will happen to breakeven level of revenues? A. Decrease by P 301,470.50 B. Decrease by P 500,000 C. Decrease by P 1,812,500 D. Increase by P 1,000,000

Name: CPL contemplates a change in technology that would reduce fixed costs
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Description: CPL contemplates a change in technology that would reduce fixed costs from P 800,000 to P 700,000. However, the ratio of variable costs to sales will increase from 68% to 80%.What will happen to breakeven level of revenues? A. Decrease by P 301,470.5

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 56P: Contribution Margin Ratio, Break-Even Sales, Operating Leverage Elgart Company produces plastic...

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Contribution Margin Ratio, Break-Even Sales, Operating Leverage Elgart Company produces plastic mailboxes. The projected income statement for the coming year follows: Required: 1. Compute the contribution margin ratio for the mailboxes. 2. How much revenue must Elgart earn in order to break even? 3. What is the effect on the contribution margin ratio if the unit selling price and unit variable cost each increase by 15%? 4. CONCEPTUAL CONNECTION Suppose that management has decided to give a 4% commission on all sales. The projected income statement does not reflect this commission. Recompute the contribution margin ratio, assuming that the commission will be paid. What effect does this have on the break-even point? 5. CONCEPTUAL CONNECTION If the commission is paid as described in Requirement 4, management expects sales revenues to increase by 80,000. How will this affect operating leverage? Is it a sound decision to implement the commission? Support your answer with appropriate computations.
Holding other factors constant, a company's contribution margin per unit will increase with: a. any increase in variable cost per unit O b. any increase in quantity sold. Oc. any increase in the selling price per unit O d. increase in its total fixed costs O e. All answers given are NOT correct. If sales are $20,000, variable costs are $8,000, and fixed costs are $2,000, the contribution margin rati is: (rounded to the nearest number) ed O a. 10% z of O b. 50% F1 F2 F3 F4 F5 F6 F7 F8 F9 %23 2$ & 2 4 6. 7 8. Q E R T Y A S F C { V }BYNI > 1.
A firm has the following total avenue and total cost schedules TR=$2Q TC=$4,000 +$1.5Q a. what is the break- even level of output? what is the level of profit at sales of 9,000 units b. as the result of a major technological breakthrough, the total cost sales is changed to: TC= $6,000 + $0.5Q What is the break-even level of output? what is the level of profit at sales of 9,000 units?
Problem Solving.Determine for what is asked. Show your solution legibly. Improper solution will not be credited. Consider the following cost and pricing data of ABC Corp. on its Product X:Price: P120.00.per unitProfit Contribution: P90.00 Proposed additional Cost: P3 per unit (for quality improvement)Current Profits: P2.4 millionSales: 100,000 units. A. Assuming that average variable costs are constant at all output levels, find ABC Corp.’s total cost function before the proposed change.B. Calculate the total cost function if the quality improvement is implemented.C. Calculate ABC Corp.’s break-even output before and after the change, assuming it cannot increase its price.D. Calculate the increase in sales that would be necessary with the quality improvement to increase profits to P2.7 million
AA Company produces and sells refrigerator magnets to be sold as novelty items by resorts. Last year, the company sold 198,400 units. The income statement for AA Company for last year is as follow: $992,000 545,600 $446,400 Sales Less: Variable expenses Contribution margin Less: Fixed expenses 180,000 $266,400 Operating Income How much was the margin of safety in revenue for last year? (Answer format: $123,456.78) * Your answer Suppose that the selling price decreases by 8 percent. How much is the revised breakeven point in units? (Answer format: 123.45) * Your answer
If this is the Overall break even point = Fixed cost / Contribution margin ratio = $16,650,000 / 64.74% = $25,718,257 approx And if the sales commission increases to 15%, the variable costs will increase thereby the contribution margin will decrease. This will also decrease the contribution margin ratio. When the contribution margin ratio decreases, the break-even point will increase, and when the break-even point increases the margin of safety will decrease. What happens: If Mirabel purchases the new equipment for $1,200,000, it will increase fixed costs by 10% but will decrease the variable cost per unit for all 3 models by 5%. What will Mirabel’s new break-even point be? If Mirabel invests the additional $650,000 in fixed marketing expenses, sales of the Model 301 are expected to increase by 8%. What is the break-even and margin of safety under these circumstances? If the projection is that sales will…
Indicate whether the breakeven point will increase or decrease based on the following change (each is independent): Variable costs increase by $10 ______ Sales price increases by $10 ______ Fixed costs decrease by $1,000 ______
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• Calculate the revenue needed to earn a target operating income of $102,000. • If fixed costs increase by $19,000, what decrease in variable cost per person must be achieved to maintain the breakeven point calculated in requirement 1? • The general manager at Lifețime Escapes proposes to increase the price of the package tour to $8,200 to decrease the breakeven point in units. Using information in the original problem, calculate the new breakeven point in units. What factors should the general manager consider before deciding to increase the price of the package tour?
You have the following data for product X: sales revenue $12,000, variable costs $8,000, allocated fixed costs $2,000. If you drop product X in the long term, total profit will: increase by $2,000 remain the same decrease by $2,000 O increase by $4,000 decrease by $4,000
1.What is a cost whose total amount changes in direct proportion to a change in volume? mixed cost fixed cost irrelevant cost variable cost 2. Which of the following costs is an example of a fixed cost? delivery costs salary of plant manager direct materials sales commissions 3. If production increases by 15%, how will total variable costs likely react? remain the same decrease by 15% increase by 7.5% increase by 15% 4. Which of the following statements is TRUE with respect to fixed costs per unit? They will increase as production decreases They will decrease as production decreases They will remain the same as production levels change They will increase as production increases 5. Canine Company produces and sells dog treats for discriminating pet owners. The unit selling price is $10, unit variable costs are $7, and total fixed costs are $3,300. What are breakeven sales? $11,000 $4,714 $3,300 $7,700 6. Fixed Company produces a single product selling for $30 per unit. Variable costs…
You have been provided with the following information: ere to search Multiple Choice Sales Less variable expenses Contribution margin Less fixed expenses Operating profit If unit sales decrease by 10%, how much will fixed costs have to be reduced by to maintain the current operating profit? $8,250 $11,000 Per Unit $25 14 $11 E Total $ 75,000 42,000 33,000 22,000 $ 11,000 N 4 37°F Mostly