3. Data for Pantok Corporation are shown below: Selling price......... Variable expenses... Contribution margin....... Per unit P75 45 P30 Percent of Sales 100% 60% 40% Fixed expenses are P75,000 per month and the company is selling 3,000 units per month. Required: a. The marketing manager believes that an P8,000 increase in the monthly advertising budget would increase monthly sales by P15,000. Should the advertising budget be increased? (show computations to prove your answer) b. Refer to the original data. Management is considering using higher-quality components that would increase the variable cost by P3 per unit. The marketing manager believes that the higher-quality product would increase sales by 15% per month. Should the higher-quality components be used? (show computations to prove your answer)

3. Data for Pantok Corporation are shown below: Selling price......... Variable expenses... Contribution margin....... Per unit P75 45 P30 Percent of Sales 100% 60% 40% Fixed expenses are P75,000 per month and the company is selling 3,000 units per month. Required: a. The marketing manager believes that an P8,000 increase in the monthly advertising budget would increase monthly sales by P15,000. Should the advertising budget be increased? (show computations to prove your answer) b. Refer to the original data. Management is considering using higher-quality components that would increase the variable cost by P3 per unit. The marketing manager believes that the higher-quality product would increase sales by 15% per month. Should the higher-quality components be used? (show computations to prove your answer)

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 5EB: Cadre, Inc., sells a single product with a selling price of $120 and variable costs per unit of $90....

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Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?
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Maple Enterprises sells a single product with a selling price of $75 and variable costs per unit of $30. The companys monthly fixed expenses are $22,500. What is the companys break-even point in units? What is the companys break-even point in dollars? Construct a contribution margin income statement for the month of September when they will sell 900 units. How many units will Maple need to sell in order to reach a target profit of $45,000? What dollar sales will Maple need in order to reach a target profit of $45,000? Construct a contribution margin income statement for Maple that reflects $150,000 in sales volume.
Cadre, Inc., sells a single product with a selling price of $120 and variable costs per unit of $90. The companys monthly fixed expenses are $180,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of October when they will sell 10,000 units. How many units will Cadre need to sell in order to realize a target profit of $300,000? What dollar sales will Cadre need to generate in order to realize a target profit of $300,000? Construct a contribution margin income statement for the month of August that reflects $2,400,000 in sales revenue for Cadre, Inc.
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