Exercise # 1: Last month when Fiesta Inc., sold 50,000 units, total sales were P200,000, total variable expenses were P120,000 and fixed expenses were P65,000. Required: 1. What is the company’s CM ratio? 2. Estimate the change in the company’s net operating income if it increases its total sales by P1,000. Exercise # 2: Mario Company distributes a single product, a woven basket whose selling price is P15 and whose variable expense is P12 per unit. The company’s monthly fixed expense is P4,200. 1. What is the BEP in units?
Exercise # 1:
Last month when Fiesta Inc., sold 50,000 units, total sales were
P200,000, total variable expenses were P120,000 and fixed expenses
were P65,000.
Required:
1. What is the company’s CM ratio?
2. Estimate the change in the company’s net operating income if it
increases its total sales by P1,000.
Exercise # 2:
Mario Company distributes a single product, a woven basket whose selling price is
P15 and whose variable expense is P12 per unit. The company’s monthly fixed
expense is P4,200.
1. What is the BEP in units?
2. What is the BEP in sales peso?
3. Compute the margin of safety.
4. Compute the margin of safety as a percentage of its sales.
Exercise #3:
Basic Illustration Corp. produces and sells a single product. The selling price is P25
and the variable cost is P15 per unit. The corporation’s fixed costs are P100,000 per
month. Average monthly sales are 11,000 units.
a) The company’s contribution margin per unit and as percentage of Sales (CMR) is
___________.
b) The corporations break-even point is P___________, ____________units.
c) If the company desires to earn profit of P20,000 before tax, it must generate sales
of P___________, ____________units.
d) If the company pays corporate income tax at the rate of 30%, and it desires to
earn after-tax profit of P21,000, it must generate sales of P___________,
____________units
e) How much sales (in pesos) must be generated to earn profit that is 8% of such
sales? P___________
f) How many units must be sold to earn a profit of P2 per unit? _________units
g) With an average monthly sales of 11,000 units, the corporation’s margin of safety
is P___________, ____________units
h) The MSR and the Break-even sales (BESR) are ___________
i) If fixed cost will increase by P20,000, the break-even point in units will increase
(decrease) by___________
j) If the variable cost per unit go up by P5, the peso break-even sales will increase
(decrease) to P __________.
k) If selling price will increase to P30, the BEP in units will ___________.
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