ABC Manufacturing is a producer of a local product used in house cleaning, called Agent C. The production manager is required to present a production report for the month August, however he got no idea on what information he needed for the report, and what analysis could be made to help the top management on their decision-making. The production manager sought your expertise on the subject matter and gave to you the following information: Sales (in Pesos) 4,957,875.00 Sales Volume 22,500.00 Variable Costs: Cost of Direct Raw Materials 895,000.00 Cost of Direct Labor 530,000.00 Cost of Packaging Materials 124,200.00 Fixed Costs: Monthly Depreciation Monthly Rent of Warehouse 650,000.00 100,000.00 Fixed Monthly Allowance for Electricity Other Fixed Manufacturing Overhead 675,000.00 146,700.00 Required: 13. If the fixed cost is increased by P 500,000 per month and 20% income tax is imposed on the net income, compute the following: How many units must ABC produce and sell to breakeven? b. With this proposed changes, how many units more or units less that ABC must produce to reach breakeven compared to the current breakeven? How many units must ABC produce and sell to achieve a profit of P 2,000,000? d. Assuming the above changes, what price per unit must be charged if the current breakeven units must be maintained? e. Using the information in letter (d), what will be effect to the contribution margin rate? а. C.
ABC Manufacturing is a producer of a local product used in house cleaning, called Agent C. The production manager is required to present a production report for the month August, however he got no idea on what information he needed for the report, and what analysis could be made to help the top management on their decision-making. The production manager sought your expertise on the subject matter and gave to you the following information: Sales (in Pesos) 4,957,875.00 Sales Volume 22,500.00 Variable Costs: Cost of Direct Raw Materials 895,000.00 Cost of Direct Labor 530,000.00 Cost of Packaging Materials 124,200.00 Fixed Costs: Monthly Depreciation Monthly Rent of Warehouse 650,000.00 100,000.00 Fixed Monthly Allowance for Electricity Other Fixed Manufacturing Overhead 675,000.00 146,700.00 Required: 13. If the fixed cost is increased by P 500,000 per month and 20% income tax is imposed on the net income, compute the following: How many units must ABC produce and sell to breakeven? b. With this proposed changes, how many units more or units less that ABC must produce to reach breakeven compared to the current breakeven? How many units must ABC produce and sell to achieve a profit of P 2,000,000? d. Assuming the above changes, what price per unit must be charged if the current breakeven units must be maintained? e. Using the information in letter (d), what will be effect to the contribution margin rate? а. C.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:ABC Manufacturing is a producer of a local product used in house cleaning, called Agent C. The production manager is
required to present a production report for the month August, however he got no idea on what information he needed
for the report, and what analysis could be made to help the top management on their decision-making.
The production manager sought your expertise on the subject matter and gave to you the following information:
Sales (in Pesos)
4,957,875.00
Sales Volume
22,500.00
Variable Costs:
Cost of Direct Raw Materials
895,000.00
Cost of Direct Labor
530,000.00
Cost of Packaging Materials
124,200.00
Fixed Costs:
Monthly Depreciation
Monthly Rent of Warehouse
Fixed Monthly Allowance for Electricity
650,000.00
100,000.00
675,000.00
Other Fixed Manufacturing Overhead
146,700.00
Required:
13. If the fixed cost is increased by P 500,000 per month and 20% income tax is imposed on the net income, compute
the following:
a. How many units must ABC produce and sell to breakeven?
b. With this proposed changes, how many units more or units less that ABC must produce to reach breakeven
compared to the current breakeven?
How many units must ABC produce and sell to achieve a profit of P 2,000,000?
d. Assuming the above changes, what price per unit must be charged if the current breakeven units must be
maintained?
C.
e. Using the information in letter (d), what will be effect to the contribution margin rate?
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