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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 be 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 Less: Fixed costs P500,000 (300,000) 200,000 (125,000) 75,000 Income before taxes { 30,000) P 45,000 Less: Income taxes Net income Requirements: On the basis of the preceding information, answer the following independent questions. 1. What is the break-even point in units? If the company determined that a particular advertising campaign had a high probability of increasing sales by 8,000 units, how much could it pay for such a campaign without reducing its planned profits? 3. If the company wants a P90,000 before-tax profit, how many units must it sell?

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 be 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 Less: Fixed costs P500,000 (300,000) 200,000 (125,000) 75,000 Income before taxes { 30,000) P 45,000 Less: Income taxes Net income Requirements: On the basis of the preceding information, answer the following independent questions. 1. What is the break-even point in units? If the company determined that a particular advertising campaign had a high probability of increasing sales by 8,000 units, how much could it pay for such a campaign without reducing its planned profits? 3. If the company wants a P90,000 before-tax profit, how many units must it sell?

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter7: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 46E: Lotts Company produces and sells one product. The selling price is 10, and the unit variable cost is...
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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 be 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 Less: Fixed costs P500,000 (300,000) 200,000 (125.000) 75,000 Income before taxes ( 30,000) P 45,000 Less: Income taxes Net income Requirements: On the basis of the preceding information, answer the following independent questions. 1. What is the break-even point in units? If the company determined that a particular advertising campaign had a high probability of increasing sales by 8,000 units, how much could it pay for such a campaign without reducing its planned profits? 3. If the company wants a P90,000 before-tax profit, how many units must it sell? 2
Transcribed Image Text: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 be 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 Less: Fixed costs P500,000 (300,000) 200,000 (125.000) 75,000 Income before taxes ( 30,000) P 45,000 Less: Income taxes Net income Requirements: On the basis of the preceding information, answer the following independent questions. 1. What is the break-even point in units? If the company determined that a particular advertising campaign had a high probability of increasing sales by 8,000 units, how much could it pay for such a campaign without reducing its planned profits? 3. If the company wants a P90,000 before-tax profit, how many units must it sell? 2
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