ABD Company publishes Imaginative Mystery. Last year the book of puzzles sold for PHP500with variable operating cost per book of PhP400 and fixed operating costs ofPhP2,000,000. How many books must ABD sell this year to achieve the breakeven pointfor the stated operating costs, given the following different circumstances?a. All figures remain the same as for last year.b. Fixed operating costs increase to PhP2,200,000; all other figures remain the same.c. The selling price increases to PhP525; all costs remain the same as for last year.d. Variable operating cost per book increases to PhP425; all other figures remain the sameas for last year.e. What conclusions about the operating breakeven point can be drawn from youranswers in letters a to d?Solution and Answer:Given:Sale Price500Variable Cost per unit400Fixed Costs2,000,000Formula:Contribution per unit = Sale Price - Variable cost per unitContribution per unit = 500-400Contribution per unit = 100BEP Computation:Breakeven quantity = Fixed costs/contribution perunitBreakeven quantity = 2,000,000/100Breakeven quantity = 20,000All figures remain the same from last yeara.BEP Computation:Breakeven quantity = Fixed costs/contribution perunitBreakeven quantity = 2,000,000/100Breakeven quantity = 20,000b. Fixed operating costs increase to PhP2,200,000Breakeven quantity = Fixed costs/Contribution per unitBreakeven quantity = 2,200,000/100Breakeven quantity = 22,000c. The selling price increases to PHP525Fixed Costs = 2,000,000Formula:Contribution per unit = Sale price - Variable cost per unitContribution per unit = 525-400Contribution per unit = 125BEP Computation:Breakeven quantity Fixed costs/Contribution perunitBreakeven quantity = 2,000,000/125Breakeven quantity = 16,000

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a. All figures remain the same as for last year. b. Fixed operating costs increase to PHP2,200,000; all other figures remain the same. c. The selling price increases to PHP525; all costs remain the same as for last year.

a. All figures remain the same as for last year. b. Fixed operating costs increase to PHP2,200,000; all other figures remain the same. c. The selling price increases to PHP525; all costs remain the same as for last year.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter11: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 11.2.2P

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