1. Without prejudice to your answers to previous questions, and assume that Davao plans to market its product in a new territory. Davao estimates that an advertising and promotion program costing P61,500 annually would need to be undertaken for the next two or three years. In addition, a P25 per ton sales commission over and above the current commission to the sales force in the new territory would be required. How many tons would have to be sold in the new territory to maintain Davao’s current after-tax income of P94,500? Questions 5 to 8 are based on the Statement of Income of Davao, Inc. which representsthe operating results for the current fiscal year ending December 31. Davao had sales of1,800 tons of product during the current year. The manufacturing capacity of Davao'sfacilities is 3,000 tons of product. Consider each question's situation separately.Sales P900,000Variable costsManufacturingSelling costs 180,000Total variable costs P495,000Contribution margin P405,000P315,000Fixed costsP 90,000ManufacturingSellingAdministrationTotal fixed costsNet income before income taxes P157,500Income taxes (40%)(63,000)Net income after income taxes112,50045.000P247,500P 94,500

Costs are the deductions in the sales revenue.

Answered: . Without prejudice to your answers to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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1. Without prejudice to your answers to previous questions, and assume that Davao plans to market its product in a new territory. Davao estimates that an advertising and promotion program costing P61,500 annually would need to be undertaken for the next two or three years. In addition, a P25 per ton sales commission over and above the current commission to the sales force in the new territory would be required. How many tons would have to be sold in the new territory to maintain Davao’s current after-tax income of P94,500?

Questions 5 to 8 are based on the Statement of Income of Davao, Inc. which represents
the operating results for the current fiscal year ending December 31. Davao had sales of
1,800 tons of product during the current year. The manufacturing capacity of Davao's
facilities is 3,000 tons of product. Consider each question's situation separately.
Sales P900,000
Variable costs
Manufacturing
Selling costs 180,000
Total variable costs P495,000
Contribution margin P405,000
P315,000
Fixed costs
P 90,000
Manufacturing
Selling
Administration
Total fixed costs
Net income before income taxes P157,500
Income taxes (40%)(63,000)
Net income after income taxes
112,500
45.000
P247,500
P 94,500

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