PROBLEM 7. Mcoy Company has, for the coming year, budgeted sales of P3,200,000 with contribution margin of 60 percent and fixed costs of P1,200,000. The company's only one product line sells for P80. The company is subject to 40 percent tax bracket. Requirements: 1. 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 annual profits? 2. A plan includes an increase in advertising cost of P96,000. What is the minimum increase in peso sales to compensate for the increase in advertising cost? 3. If the company wants its before-tax profit to increase by 10 percent on its expected sales volume of 40,000 units, what selling price must Mcoy use?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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