PROBLEM 6. After its cost structure (variable costs P15 per unit and monthly fixed costs of P125,000),as well as potential market, Babaero Company established what it considered to be a reasonable selling price. The company expected to sell 20,000 units per month and planned its monthly results as follows: Sales @P25 Less: Variable costs @P15 Contribution margin Less: Fixed costs P500,000 (300,000) 200,000 (125,000) 75,000 Income before taxes { 30,000) P 45,000 Less: Income taxes Net income Requirements: On the basis of the preceding information, answer the following independent questions. 1. What is the break-even point in units? If the company determined that a particular advertising campaign had a high probability of increasing sales by 8,000 units, how much could it pay for such a campaign without reducing its planned profits? 3. If the company wants a P90,000 before-tax profit, how many units must it sell?

PROBLEM 6. After its cost structure (variable costs P15 per unit and monthly fixed costs of P125,000),as well as potential market, Babaero Company established what it considered to be a reasonable selling price. The company expected to sell 20,000 units per month and planned its monthly results as follows: Sales @P25 Less: Variable costs @P15 Contribution margin Less: Fixed costs P500,000 (300,000) 200,000 (125,000) 75,000 Income before taxes { 30,000) P 45,000 Less: Income taxes Net income Requirements: On the basis of the preceding information, answer the following independent questions. 1. What is the break-even point in units? If the company determined that a particular advertising campaign had a high probability of increasing sales by 8,000 units, how much could it pay for such a campaign without reducing its planned profits? 3. If the company wants a P90,000 before-tax profit, how many units must it sell?

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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Question

PROBLEM 6. After its cost structure (variable costs P15 per
unit and monthly fixed costs of P125,000),as well as potential
market, Babaero Company established what it considered to be
a reasonable selling price. The company expected to sell
20,000 units per month and planned its monthly results as
follows:
Sales @P25
Less: Variable costs @P15
Contribution margin
Less: Fixed costs
P500,000
(300,000)
200,000
(125.000)
75,000
Income before taxes
( 30,000)
P 45,000
Less: Income taxes
Net income
Requirements: On the basis of the preceding information,
answer the following independent questions.
1. What is the break-even point in units?
If the company determined that a particular advertising
campaign had a high probability of increasing sales by
8,000 units, how much could it pay for such a campaign
without reducing its planned profits?
3. If the company wants a P90,000 before-tax profit, how
many units must it sell?
2

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