4.19 Waterfront Division of Maxwell Products manufactures a component used in the production of garden tools. The President of that division states that the division has the capacity to produce 5,000 units of this component each month. The fixed costs of production are P10,000 each month. The President admits that it will take some time before the plant has enough orders to operate at capacity but those sales should range between 3,000 and 4,000 units per month. He is interested in examining what happens to the margin of safety and the operating leverage over a range of activity. To help with this analysis, the accountant tells you that each unit is sold for P20, and the variable unit cost is P15. Instructions:

4.19 Waterfront Division of Maxwell Products manufactures a component used in the production of garden tools. The President of that division states that the division has the capacity to produce 5,000 units of this component each month. The fixed costs of production are P10,000 each month. The President admits that it will take some time before the plant has enough orders to operate at capacity but those sales should range between 3,000 and 4,000 units per month. He is interested in examining what happens to the margin of safety and the operating leverage over a range of activity. To help with this analysis, the accountant tells you that each unit is sold for P20, and the variable unit cost is P15. Instructions:

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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AutoSave OFF 096DCEP… CB Draw Page Layout Home Insert X [ ✓ Paste B35 A Arial A 1 Chapter 5: Applying Excel 2 3 Data 4 Unit sales 5 Selling price per unit 6 Variable expenses per unit 7 Fixed expenses BIU - fx =B31/833 49 50 30 Variable expenses varable 31 Contribution margin 32 Fixed expenses 33 Net operating income 11 12 Compute the CM ratio and variable expense ratio 13 Selling price per unit 14 Variable expenses per unit 15 Contribution margin per unit 16 17 CM ratio 18 Variable expense ratio 19 20 Compute the break-even point 21 Break-even in unit sales 22 Break-even in dollar sales 23 24 Compute the margin of safety 25 Margin of safety in dollars 26 Margin of safety percentage 27 28 Compute the degree of operating leverage 29 Sales 34 35 Degree of operating leverage 36 37 38 39 40 41 42 43 44 45 46 47 48 Ready T 8 9 Enter a formula into each of the cells marked with a ? below 10 Review Problem: CVP Relationships Chapter 5 Form V esc ✓ 10 1 + LO Accessibility: Good to go @ 2…