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1
1. Dynamic Company had sales of P 1,500,000 fixed costs of P400,000.00 and variable costs of P900,000.00
- What would be the amount of the sales pesos at the break even point
- How much should the sales be in order to produce a net income of P300,000?
2. Clariton Company is planning to sell 100,000 units of Product Q for 12 pesos a unit. The fixed costs are 280,000. In order to realize a profit of P200,000.
- What would be the variable costs?
- If the variable cost is 30% of the sale, what is the break even point in peso?
3. The following information pertains to Nova Co.'s cost-volume-profit relationships:
Breakeven point in units sold 1,000
Variable costs per unit P 500
Total fixed costs 150,000
How much will be contributed to profit before income taxes by the 1,001st unit sold?
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Expert Solution
1) Computation of Amount of Sales Pesos at the Break even Point:
Amount of Sales Pesos at the Break even Point = Fixed Cost/Contribution Margin Ratio
Here,
Contribution Margin Ratio = (Sales - Variable Cost)/Sales = (1,500,000-900,000)/1,500,000 = 40%
Amount of Sales Pesos at the Break even Point = 400,000/40% = 1,000,000
Computation of Required Sales in order to produce a net income of P300,000:
Required Sales = (Fixed Cost+Target Income)/Contribution Margin Ratio
= (400,000+300,000)/40%
= 700,000/40%
Required Sales = 1,750,000
So, Required Sales in order to produce a net income of P300,000 is P1,750,000.
2) Computation of Variable Costs:
Profit = Sales - Variable Cost - Fixed Cost
200,000 = (100,000*12) - (100,000*x) - 280,000
200,000+280,000 = 1,200,000 - 100,000x
100,000x = 1,200,000-480,000
x = 720,000/100,000 = 7.2
So, Variable Cost = 100,000*7.2 = 720,000
Computation of Break-even Point in Peso If the variable cost is 30% of the sale:
Break-even Point in Peso = Fixed Cost/Contribution Margin Ratio
= 280,000/(1-30%)
= 280,000/70%
Break-even Point in Peso = 400,000
3) Computation of Contribution Margin per Unit:
Break-even Point (in units) = Fixed Cost / Contribution Margin per Unit
Contribution Margin per Unit = Fixed Cost / Break-even Point (in units)
Contribution Margin per Unit = 150,000 / 1,000 units
Contribution Margin per Unit = 150
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