Problem 6. Highlands Inc., produces and sells camping equipment. One of the company's products, a camp lantern, sells for P150 per unit. Variable expenses are P120 per lantern, and fixed expenses associated with the lantern total P450,000 per month. Required: 1. Determine the breakeven point in units and in pesos. m. At present, the company is selling 15,000 lanterns a month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in the number of lanterns sold each. How much is the change in net income if the sales manager's expectation is correct? Problem 7. Kate Company produces a single product and presented below are data taken from its recent income statement. Sales (135,000 units at P20) Less: Variable costs P2,700,000 1,890,000 810,000 900,000 P (90,000) Contribution Margin Less: Fixed costs Loss Required: a. The sales manager feels that an P110,000 increase in monthly advertising budget, combined with an intensified effort by the sales staff will result in a P840,000 increase in monthly sales. Considering these changes, what will be the company's increase or decrease in profit? b. The president is convinced that a 10% reduction in the selling price, combined with an increase of P35,000 in the monthly advertising budget, will cause units sales to double. Considering these changes, how much is the company's expected profit? c. A new package for the product is being considered to induce sales. This package costs P0.60 per unit. Considering the new package cost, how many units would have to be sold each month to earn a profit of P90,000?
Problem 6. Highlands Inc., produces and sells camping equipment. One of the company's products, a camp lantern, sells for P150 per unit. Variable expenses are P120 per lantern, and fixed expenses associated with the lantern total P450,000 per month. Required: 1. Determine the breakeven point in units and in pesos. m. At present, the company is selling 15,000 lanterns a month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in the number of lanterns sold each. How much is the change in net income if the sales manager's expectation is correct? Problem 7. Kate Company produces a single product and presented below are data taken from its recent income statement. Sales (135,000 units at P20) Less: Variable costs P2,700,000 1,890,000 810,000 900,000 P (90,000) Contribution Margin Less: Fixed costs Loss Required: a. The sales manager feels that an P110,000 increase in monthly advertising budget, combined with an intensified effort by the sales staff will result in a P840,000 increase in monthly sales. Considering these changes, what will be the company's increase or decrease in profit? b. The president is convinced that a 10% reduction in the selling price, combined with an increase of P35,000 in the monthly advertising budget, will cause units sales to double. Considering these changes, how much is the company's expected profit? c. A new package for the product is being considered to induce sales. This package costs P0.60 per unit. Considering the new package cost, how many units would have to be sold each month to earn a profit of P90,000?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Kindly answer the Problems 6 and 7. Kindly, check and answer what is required.
Transcribed Image Text:Problem 6. Highlands Inc., produces and sells camping equipment. One of the company's products, a camp
lantern, sells for P150 per unit. Variable expenses are P120 per lantern, and fixed expenses associated with the
lantern total P450,000 per month.
Required:
1. Determine the breakeven point in units and in pesos.
m. At present, the company is selling 15,000 lanterns a month. The sales manager is convinced that
a 10% reduction in the selling price would result in a 25% increase in the number of lanterns sold
each. How much is the change in net income if the sales manager's expectation is correct?
Problem 7. Kate Company produces a single product and presented below are data taken from its recent income
statement.
Sales (135,000 units at P20)
Less: Variable costs
P2,700,000
1,890,000
Contribution Margin
810,000
Less: Fixed costs
900,000
Loss
P (90,000)
Required:
a. The sales manager feels that an P110,000 increase in monthly advertising budget, combined with an
intensified effort by the sales staff will result in a P840,000 increase in monthly sales. Considering these
changes, what will be the company's increase or decrease in profit?
b. The president is convinced that a 10% reduction in the selling price, combined with an increase of
P35,000 in the monthly advertising budget, will cause units sales to double. Considering these changes,
how much is the company's expected profit?
c. A new package for the product is being considered to induce sales. This package costs PO.60 per unit.
Considering the new package cost, how many units would have to be sold each month to earn a profit of
P90,000?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education