PROBLEM 6. After its cost structure (variable costs P15 perunit and monthly fixed costs of P125,000),as well as potentialmarket, Babaero Company established what it considered to ba reasonable selling price. The company expected to sell20,000 units per month and planned its monthly results asfollows:Sales @P25Less: Variable costs @P15Contribution marginP500,000[300,000)200,000(125,000)75,000( 30,000)P 45,000Less: Fixed costsIncome before taxesLess: Income taxesNet income4. If the company wants a 20% before-tax return on sales,what level of sales, in pesos, does it need?5. If the company wants a P60,000 after-tax profit, how manyunits must it sell?6. If the company wants an after-tax return on sales of 10.5%,how many units must it sell?

Contribution margin or gross profit refers to the profit earns by the company for selling goods and…

4. If the company wants a 20% before-tax return on sales, what level of sales, in pesos, does it need? 5. If the company wants a P60,000 after-tax profit, how many units must it sell? 6. If the company wants an after-tax return on sales of 10.5%, how many units must it sell?

4. If the company wants a 20% before-tax return on sales, what level of sales, in pesos, does it need? 5. If the company wants a P60,000 after-tax profit, how many units must it sell? 6. If the company wants an after-tax return on sales of 10.5%, how many units must it sell?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...

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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 b
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
P500,000
[300,000)
200,000
(125,000)
75,000
( 30,000)
P 45,000
Less: Fixed costs
Income before taxes
Less: Income taxes
Net income
4. If the company wants a 20% before-tax return on sales,
what level of sales, in pesos, does it need?
5. If the company wants a P60,000 after-tax profit, how many
units must it sell?
6. If the company wants an after-tax return on sales of 10.5%,
how many units must it sell?

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If a company has fixed costs of $6.000 per month and their product that sells for $200 has a contribution margin ratio of 30%, how many units must they sell in order to break even? A. 100 B. 180 C. 200 D. 2,000
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