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Situational
The following information pertain to questions I and 2:
The committee members would like to charge P30 per person for the evening's
activities.
The break-even point for the Extravaganza (in terms of the number of
persons that must attend) is
a. 300 persons.
b. 350 persons.
c. 450 persons.
d. 400 persons.
Assume that only 250 persons attended the Extravaganza last year. If the
same number attends this year, what price per ticket must be charged to
break even?
a. P45
b. P40
P43.50
C. P42
d. Supporting Analysis/Computation:
(1) Answer: D
Omega Enterprises sells two products, Model E100 and F900. Monthly sales
and the contribution margin ratios for the two products, follow:
Product
Model E100 Model F900 Total
Sales P700,000 P300,000 P1,000,000
Contribution margin ratio 60% 70% ?
5. The break-even point for the company based on the current sales mix's
a. P900,000.
b. P950,000.
c. P1,000,000.
d. P1,050,000.
3A-8
Cost-Volume-Profit Relatfauhips
S ipporriag Aaa(ysWComptsrtio.s:
(3) Answer: B
Model E100 Model P900 Total Company
Amount % Amount % Amount
Sales P700.000 100 P300,000 100 P1,000,000 lo)
Less variable
expenses 28A 000 40 90.0QQ - 70, 3"
Contribution margin P420, 000 60 P210,000 70 610.000 6)
(4) Answer: B
Model E100 Model F900 Total Compam
Amount % Amount % Amount 'c
Sales P700,000 100 P300, 000 100 P1,000.000 100
Less variable
expenses _,j8 0Q 40 90,000 30 170, 400 J
Contribution margin P420.000 60 P210, 000 70 630.000 63
Less fixed expenses 198's oo
Net operating
income P 31.500
(5) Answer: B
Hoopie Company sells a single product. The company's sales and ewer cs for a
recent month follow:
Total Per Unit
Sales P600.000 P40
Less variable expenses 4 0.044 _2j
Contribution margin 180,000 Lu
Lees fixed expenses t SQm
Net operating in ome E, -3
3A-9
t Intl i-.H
7. 1fow many units would have to be sold each month to earn a minimum
target profit of P 18,000?
a. 14,500
b. 12,000
c. 14,000
d. 14,700
Supporting
Analysis/Computation:
(6) Answer: B
Sale
= Variable expenses + Fixed expenses + Profits
s = P28Q + P150, 000 + PO
P40Q = P150,000
P150, 000 + P12 per unit
P12Q J2 QQMpjyt, or at P40 per unit, P500.000
3A-1o
L ost-volume-Profit Relatieinshilj
(7) Answer: C
(9) Answer: C
The CM ratio is 30%
Sitntonal
The following information pertain to questions 10 through 12:
Fluffy Inc.'s income statement for the year 2006 on production and sales of
200,000 units is as follows:
Revenues P2,600,000
Cost of goods sold 1.600.000
Gross margin 1,000,000
Marketing and distribution costs 1.l AM
Operating income (loss) U159.00)
?4_11
Unit 3-A
Fluffy's fixed manufacturing costs were P500,000, and variable marketing
distribution costs were P4 per unit.
(10) Answer:A
(11) Answer: C
I
Total marketing and distribution costs P1,150, 000
Variable marketing and distribution 8 0 0
costs P 35Q.f1QQ
Fixed manufacturing and distribution
costs
31A-12
Cost- Volume-Profit Relationships
(12) Answer: A
Fixed manufacturing marketing & distribution
Great-even
costs point in units =
Contribution margin per unit
P850,000
P3.50
242.858
Answer: D
14. Region Company sells a product for P35 per unit, and the variable
production and sales costs are P21 per unit. If Region Company adopts a
40 Percent increase in selling price of its product, how much can unit
sales decline before total profits decline?
a. 40 percent. C. 57 percent.
b. 50 pavent, d. 100 percent.
Answer: B
Sxp *rdnt Awttlyslvl wwwMtbw:
h Te contribution margin was P14 (P35 - P21) without this price increa+e and e by
volume could deelln
P28 (P35 x 1.4 - P21) with the increase. Thus, sales
50 percent before profits would fall below profit level without sales increase-
Mr-13
Unit 3-A
Situational
The following data apply to items 15 through 19.
The MABES Company uses a profit-volume graph similar to the one shown
below to represent the cost/volume/profit relationships of its operations. The
vertical ty-axis) is the profit in pesos and the horizontal (x-axis) is the volume in
units. The diagonal line is the contribution margin line.
Profit
in P
Volume
in units
16. The vertical distance from the dotted line to the contribution margin line
denoted as B on the profit-volume graph represents
a. the total contribution margin.
b. the contribution margin per unit.
c. the contribution margin rate.
d. total sales.
Cost-Volume-Profit Relationships
1 8. If MARI'.S Company's variable costs per unit were to increase but its unit
selling price stays constant,
a. the contribution margin line would shift upward parallel to the
present line.
h. the contribution margin line would shift downward parallel to the
present line.
C. the slope of the contribution margin line would be more pronounced
(steeper).
d the slope of the contribution margin line would be less pronounced
Mauer).
19. It' MARES Company decided to increase its unit selling price to offset
exactly the increase in the variable cost per unit,
a. the contribution margin line would shift upward parallel to the
present line.
h. the contribution margin line would shift downward parallel to the
present line.
e the slope of the contribution margin line would be more pronounced
(steeper).
d. the contribution margin line would coincide with the present
contribution margin line.
(1 5) Answer: D
- sales equals total costs
The paint where the company has costs.
no profit
or contrihunun margin equals fired
Unit 3-A
(16) Answer: A
in the problem :.s a ,
The line referred to ontributi',n line. As
volume
increases, the total contribution margin increased. The
distance
labeled B represents total contribution margin.
(17) Answer: B
will cause the loss to be greater at
An increase in fixed costs
zero volume
and it will take a larger volume to breakeven. The
slope ojthe contribution margin line, however, will not
change.
(18) Answer: D
will re.sult in
An increase in the variable costs with no change in sales
a decrease
in the contribution and cause the line to slope more to the
right.
(19) Answer: D
There would be no change in the contribution margin per unit; thus,
no change in the contribution margin line.