. Compute the number of units of each product that must be sold for Gosnell Company to break even. 2. Assume that the marketing manager changes the sales mix of the two products so that the ratio is three squares to five circles. Repeat Requirement 1 3. Refer to the original data. Suppose that Gosnell can increase the sales of squares with increased advertising. The extra advertising would cost an additional P45,000, and some of the potential purchasers of circles would switch to squares. In total, sales of squares would increase by 15,000 units, and sale of circles would decrease by 5,000 units. Would Gosnell be better off with this strategy?
Accounting
Gosnell Company produces two products: squares and circles. The projected income for the
coming year, segmented by product line, follows:
Squares Circles Total
Sales P300,000 P2,500,000 P2,800,000
Less: Variable expenses 100,000 500,000 600,000
Contribution margin P200,000 P2,000,000 P2,200,000
Less: Direct fixed expenses 28,000 1,500,000 1,528,000
Product margin P172,000 P 500,000 P 672,000
Less: Common fixed
expenses
100,000
Operating expenses P 572,000
The selling prices are P30 for squares and P50 for circles.
1. Compute the number of units of each product that must be sold for Gosnell Company
to break even.
2. Assume that the marketing manager changes the sales mix of the two products so
that the ratio is three squares to five circles. Repeat Requirement 1
3. Refer to the original data. Suppose that Gosnell can increase the sales of squares with
increased advertising. The extra advertising would cost an additional P45,000, and
some of the potential purchasers of circles would switch to squares. In total, sales of
squares would increase by 15,000 units, and sale of circles would decrease by 5,000
units. Would Gosnell be better off with this strategy?
Step by step
Solved in 4 steps
