JJ Company produces a variety of products. The company's project income statement for the coming year is: Sales (218,000 units @ P60) P13,080,000 Total variable costs Contribution margin Total fixed costs Operating income 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
JJ Company produces a variety of products. The company's project income statement for the coming year is: Sales (218,000 units @ P60) P13,080,000 Total variable costs Contribution margin Total fixed costs Operating income 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
Chapter1: Financial Statements And Business Decisions
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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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