Mr. Josh Kho, the operations manager of Achos Merchandising Corp. Is worried about the result of its operation this year. Although the accounting dept. has not submitted the financial statements yet, the following data where already available pertaining to year 2020. Total number of units sold at P50 per unit price 120,000 units Total fixed costs and expenses P1,600,000 Variable cost rate 60% Because of other pressing problems, he hired you to give him information and computation that will help him plan for the next year operation. He specifically wants the following (with proofs, if possible): Break-even point in peso sales and in units The margin of safety in peso, in units and in percentage If the profit this year will be doubled next year, how much sales should be realized? If the number of units sold next year, exceeds the break-even point by 50,000 units, what is result of the operation? If management projects a profit of P1,200,000 after the 25% tax, how many units should be sold? If the total peso sales generated next year is short by P1million in order to break-even, what is the result of the operation? If management wants 15% profit from sales, how many units should the company sells? What is the degree of operating leverage (DOL)? If management projects that sales will reduce by 10% next year, what is the percentage decrease in profit? If the selling price per unit next year is reduced by 10% and an increase in variable cost per unit by 5% due to the increase in the price of the supplier but this will result in increase in quantity sold next year by 50%. What would be the result of the operation? (use the contribution margin format)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Mr. Josh Kho, the operations manager of Achos Merchandising Corp. Is worried about the result of its operation this year. Although the accounting dept. has not submitted the financial statements yet, the following data where already available

pertaining to year 2020.
Total number of units sold at P50 per unit price	120,000 units
Total fixed costs and expenses	P1,600,000
Variable cost rate	60%

Because of other pressing problems, he hired you to give him information and computation that will help him plan for the next year operation. He specifically wants the following (with proofs, if possible):

Break-even point in peso sales and in units
The margin of safety in peso, in units and in percentage
If the profit this year will be doubled next year, how much sales should be realized?
If the number of units sold next year, exceeds the break-even point by 50,000 units, what is result of the operation?
If management projects a profit of P1,200,000 after the 25% tax, how many units should be sold?
If the total peso sales generated next year is short by P1million in order to break-even, what is the result of the operation?
If management wants 15% profit from sales, how many units should the company sells?
What is the degree of operating leverage (DOL)? If management projects that sales will reduce by 10% next year, what is the percentage decrease in profit?
If the selling price per unit next year is reduced by 10% and an increase in variable cost per unit by 5% due to the increase in the price of the supplier but this will result in increase in quantity sold next year by 50%. What would be the result of the operation? (use the contribution margin format)

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