Required: 1. Compute the contribution margin per unit, and calculate the break-even point in units. 2. The management has decided to increase the advertising budget by P250,000. This will increase sales revenues by P1,000,000. By how much will operating income increase or decrease as a result of this action? 3. Suppose sales revenues exceed the estimated amount on the income statement by P1,500,000. Prepare a new income statement and determine the amount of understatement of net income. 4. Compute the margin of safety based on the original income statement. 5. Compute the degree of operating leverage based on the original income statement. If sales revenues are 8% greater than expected, what is the percentage increase in operating income?
Required: 1. Compute the contribution margin per unit, and calculate the break-even point in units. 2. The management has decided to increase the advertising budget by P250,000. This will increase sales revenues by P1,000,000. By how much will operating income increase or decrease as a result of this action? 3. Suppose sales revenues exceed the estimated amount on the income statement by P1,500,000. Prepare a new income statement and determine the amount of understatement of net income. 4. Compute the margin of safety based on the original income statement. 5. Compute the degree of operating leverage based on the original income statement. If sales revenues are 8% greater than expected, what is the percentage increase in operating income?
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 47E: Klamath Company produces a single product. The projected income statement for the coming year is as...
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