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JJ Company produces a variety of products. The company's project income statement for the coming year is: Sales (218,000 units @ P60) Total variable costs Contribution margin Total fixed costs Operating income P13,080,000 7.630.000 5,450,000 4.250.000 P 1,200,000 Required: 1. Compute the contribution margin per unit, and calculate the break-even point in units. 2. The management has decided to increase the advertising budget by P250,000. This will increase sales revenues by P1,000,000. By how much will operating income increase or decrease as a result of this action? 3. Suppose sales revenues exceed the estimated amount on the income statement by P1,500,000. Prepare a new income statement and determine the amount of understatement of net income. 4. Compute the margin of safety based on the original income statement. 5. Compute the degree of operating leverage based on the original income statement. If sales revenues are 8% greater than expected, what is the percentage increase in operating income?

JJ Company produces a variety of products. The company's project income statement for the coming year is: Sales (218,000 units @ P60) Total variable costs Contribution margin Total fixed costs Operating income P13,080,000 7.630.000 5,450,000 4.250.000 P 1,200,000 Required: 1. Compute the contribution margin per unit, and calculate the break-even point in units. 2. The management has decided to increase the advertising budget by P250,000. This will increase sales revenues by P1,000,000. By how much will operating income increase or decrease as a result of this action? 3. Suppose sales revenues exceed the estimated amount on the income statement by P1,500,000. Prepare a new income statement and determine the amount of understatement of net income. 4. Compute the margin of safety based on the original income statement. 5. Compute the degree of operating leverage based on the original income statement. If sales revenues are 8% greater than expected, what is the percentage increase in operating income?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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JJ Company produces a variety of products. The company's project income statement for the coming year is: Sales (218,000 units @ P60) Total variable costs Contribution margin Total fixed costs Operating income P13,080,000 7,630.000 5,450,000 4.250.000 P 1,200,000 Required: 1. Compute the contribution margin per unit, and calculate the break-even point in units. 2. The management has decided to increase the advertising budget by P250,000. This will increase sales revenues by P1,000,000. By how much will operating income increase or decrease as a result of this action? 3. Suppose sales revenues exceed the estimated amount on the income statement by P1,500,000. Prepare a new income statement and determine the amount of understatement of net income. 4. Compute the margin of safety based on the original income statement. 5. Compute the degree of operating leverage based on the original income statement. If sales revenues are 8% greater than expected, what is the percentage increase in operating income?
Transcribed Image Text:JJ Company produces a variety of products. The company's project income statement for the coming year is: Sales (218,000 units @ P60) Total variable costs Contribution margin Total fixed costs Operating income P13,080,000 7,630.000 5,450,000 4.250.000 P 1,200,000 Required: 1. Compute the contribution margin per unit, and calculate the break-even point in units. 2. The management has decided to increase the advertising budget by P250,000. This will increase sales revenues by P1,000,000. By how much will operating income increase or decrease as a result of this action? 3. Suppose sales revenues exceed the estimated amount on the income statement by P1,500,000. Prepare a new income statement and determine the amount of understatement of net income. 4. Compute the margin of safety based on the original income statement. 5. Compute the degree of operating leverage based on the original income statement. If sales revenues are 8% greater than expected, what is the percentage increase in operating income?
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