TOPIC: BREAKEVEN AND SENSITIVITY ANALYSIS OBLEM 1. Manufacturing is a producer of a local product used in house deaning, called Agent C. The production managen red to present a production report for the month August, however he got no idea on what information he need he report, and what analysis could be made to help the top management on their decision-making. production manager sought your expertise on the subject matter and gave to you the folowing information: Sales (in Pesos) 4,957,875.00 Sales Volume 22,500.00 Variable Costs: Cost of Direct Raw Materials 895,000.00 530,000.00 Cost of Direct Labor Cost of Packaging Materials Fared Costs: 124,200.00 Monthly Depreciation Monthly Rent of Warehouse Fixed Monthly Allowance for Electricity Other Foed Manufacturing Overhead 650,000.00 100,000.00 675,000.00 146,700.00
TOPIC: BREAKEVEN AND SENSITIVITY ANALYSIS OBLEM 1. Manufacturing is a producer of a local product used in house deaning, called Agent C. The production managen red to present a production report for the month August, however he got no idea on what information he need he report, and what analysis could be made to help the top management on their decision-making. production manager sought your expertise on the subject matter and gave to you the folowing information: Sales (in Pesos) 4,957,875.00 Sales Volume 22,500.00 Variable Costs: Cost of Direct Raw Materials 895,000.00 530,000.00 Cost of Direct Labor Cost of Packaging Materials Fared Costs: 124,200.00 Monthly Depreciation Monthly Rent of Warehouse Fixed Monthly Allowance for Electricity Other Foed Manufacturing Overhead 650,000.00 100,000.00 675,000.00 146,700.00
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:MANAGEMENT SCIENCE
PRACTICE SET
TOPIC: BREAKEVEN AND SENSITIVITY ANALYSIS
PROBLEM 1.
ABC Manufacturing is a producer of a local product used in house deaning, called Agent C. The production manager is
required to present a production report for the month August, however he got no idea on what information he needed
for the report, and what analysis could be made to help the top management on their decision-making.
The production manager sought your expertise on the subject matter and gave to you the following information:
Sales (in Pesos)
4,957,875.00
22,500.00
Sales Volume
Varlable Costs:
Cost of Direct Raw Materials
895,000.00
530,000.00
124,200.00
Cost of Direct Labor
Cost of Packaging Materials
Fixed Costs:
Monthly Depreciation
Monthly Rent of Warehouse
Fixed Monthly Allowance for Electricity
Other Fixed Manufacturing Overhead
650,000.00
100,000.00
675,000.00
146,700.00
Required:
BREAKEVEN ANALYSIS
1. Compute the selling price per unit of Agent C.
2. Compute the variable cost per unit of Agent C.
3. Compute the variable cost rate of Agent C.
4. Compute the contribution margin per unit of Agent C.
5. Compute the current contribution margin rate of Agent C.
6. Compute the total fixed costs in producing Agent C.
7. How many units must ABC Manufacturing produce to breakeven?
8. How many units must ABC Manufacturing produce to achieve a desired profit of P 2,000,000?
9. From the current sales volume units, how many more units must ABC Manufacturing produce and sell to reach the
desired profit of P 2,000,000?
10. From the current breakeven sales, how many more units must ABC produce and sell to achieve a profit of P 1,900,000?
11. How much will ABC ean if it produces and sells 10,000 units of Agent C?
SENSITIVITY ANALYSIS
12. If the selling price per unit is increased by 20% of its current price while the variable cost per unit is also increased
by 30%, compute the following:
a. Compute the new selling price per unit.
b. Compute the new variable cost per unit.
C. Compute the new contribution margin rate.
d. How many units must ABC produce and sell to avoid losing money?
e. At what n" unit ABC will start earning profit?
f. With this proposed changes, how many units more or units less that ABC must produce to reach breakeven
compared to the current breakeven?
9. How many units of Agent C must be produced and sold to earn a profit P 2,000,000?
h. With these changes, how many units more or units less should ABC produce to earn a profit of P 2,000,000, as
compared to the units determined using the current price and variable costs?
13. If the fixed cost is increased by P 500,000 per month and 20% income tax is imposed on the net income, compute
the following:
a. How many units must ABC produce and sell to breakeven?
b. With this proposed changes, how many units more or units less that ABC must produce to reach breakeven
compared to the current breakeven?
C. How many units must ABC produce and sell to achieve a profit of P 2,000,000?
d. Assuming the above changes, what price per unit must be charged if the current breakeven units must be
maintained?
e. Using the information in letter (d), what will be effect to the contribution margin rate?
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