Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao

Since 1977

MAS.3203 TRINIDAD/ALENTON/URO
Costs Volume Profit Analysis MAY 2022

LECTURE NOTES
Cost-volume-profit (C-V-P) analysis as a tool for
planning and control. Contribution Margin. Unit contribution is the difference
I. C-V-P analysis: between the unit selling price and the unit variable
A. a procedure that examines changes in costs and expenses. Total contribution margin is difference
volume levels and the resulting effects on profit. between the total revenues and the total variable
B. Sales Revenue – Variable Costs – Fixed Costs = expenses.
Profit
C. Tool for both planning and control. Sales Mix. The composition of total sales in terms of
1. Can calculate net income when sales volume is various products, i.e., the percentage of each product
known included in total sales.
2. Can determine the level of sales need to reach
a targeted amount of income. Margin of Safety – Indicates the amount by which actual or
D. Only used under certain conditions and when certain planned sales may be reduced without incurring a loss.
assumptions hold true. It is the excess of actual or planned sales volume over
1. The behavior of variable and fixed costs can be break-even sales. This can be expressed in terms of
measured reasonably. units or in pesos. Margin of safety is the percentage of
2. Costs and revenues have a close linear margin of safety to total actual or planned sales.
approximation.
3. Efficiency and productivity hold steady within Factors Affecting Break-even Point
the relevant range.
4. Cost and price variables hold steady during the 1. Selling price per unit
period being planned. 2. Variable cost per unit
5. The product sales mix does not change during 3. Fixed cost
the period being planned. 4. Sales mix
6. Production and sales volume are approximately
equal. Operating Leverage. A measure of the extent to which
fixed costs are being used in an organization. The
Break-even sales is the point or sales volume where total greater the fixed costs in relation to variable cost, the
revenues equal total costs. This is the level of activity greater is the operating leverage available and the
where there neither profit nor loss. At break-even greater is the sensitivity of net income to change in
point, the total contribution margin equals total fixed sales.
expenses.
Degree of Operating Leverage. A measure, at a given
Methods of Computing Break-even Point level of sales, of how a percentage change in sales
volume will affect profits. DOL is computed:
1. Equation method or algebraic approach
2. Contribution margin method or formula approach DOL = Total contribution margin/Net income
3. Graphical calculation
% Increase in Net Income = (% Increase in Sales x DOL)

Page 1 of 7 www.teamprtc.com.ph MAS.3203

EXCEL PROFESSIONAL SERVICES, INC.

DISCUSSION QUESTIONS
STRAIGHT PROBLEMS 1. If the company determined that a particular
advertising campaign had a high probability of
PROBLEM NO. 1. increasing sales by 3,000 units, how much could it pay
The following data are available for Marina Company’s one for such a campaign without reducing its planned
product. profits?
2. If the company wants a P90,000 before-tax profit,
Unit selling price P 800 how many units must it sell?
Unit variable cost 3. If the company wants a 10% before-tax return on
Manufacturing 400 sales, what level of sales, in pesos, does it need?
Selling and Administrative 240 4. If the company wants a P90,000 after-tax profit, how
Fixed costs many units must it sell?
Manufacturing 1,640,000 5. If the company wants an after-tax return on sales of
Selling and Administrative 920,000 9%, how many units must it sell?
Unit Volume 24,000 6. The company is considering offering its salespeople a
5% commission on sales. What would the total sales,
Requirements: in pesos, have to be in order to implement the
1. Unit contribution margin and Contribution margin commission plan and still earn the planned before-tax
ratio income of P65,000?
2. Total contribution margin
3. Break even volume in units and pesos PROBLEM NO. 4.
4. Margin of safety in units, pesos and margin of Divine Company has, for the coming year, budgeted sales
safety ratio of P2,000,000 with contribution margin of 60 percent and
5. Degree of operating average fixed costs of P700,000. The company’s only one product
6. Selling price that Marina must charge to double the line sells for P40. The company is subject to 40 percent tax
operating profit based on the given cost structure, bracket.
still selling 24,000.
Requirements:
PROBLEM NO. 2. 1. If the company determined that a particular
Handy, Inc., sells a single product. The company's most advertising campaign had a high probability of
recent income statement is given below. increasing sales by P200,000, how much could it
Sales (2,000 units) P50,000 pay for such a campaign without reducing its
Less: Variable expenses 30,000 planned annual profits?
Contribution margin 20,000 2. A plan includes an increase in advertising cost of
Less: Fixed expenses 15,000 P96,000. What is the minimum increase in peso
Operating income P 5,000 sales to compensate for the increase in advertising
cost?
Requirements: 3. The operations manager believes that the variable
1. If 200 more units are sold, how much increase in cost will increase to P18 per unit. The sales
profit is expected? manager believes the selling price can be increased.
2. If sales volume increases by 20 percent, compute What is the new selling price that will give the same
the new profit. contribution margin ratio of 60%?
4. Assume that the amount of total fixed cost
3. If the firm was able to increase its sales volume by
increases by 15%. What is the effect of this
15 percent without a change in its selling price,
increase on each of the following?
variable costs, or fixed costs, would this change the a. Break-even sales volume
breakeven point? b. Before-tax profit
4. If the firm was able to increase both its selling price c. Contribution margin
and variable cost by 15 percent, would the d. Required sales to earn same amount of profit
breakeven point in units or in pesos change?
5. Prepare comparative income statements at sales PROBLEM NO. 5.
level of 1,000, 1,500 and 2,000 units. The Bicolors Company manufactures and sells two products.
The selling prices and variable costs of the products are as
PROBLEM NO. 3. follows:
After its cost structure (variable costs P11.25 per unit and
monthly fixed costs of P90,000) and potential market, Boni
Company established what it considered to be a reasonable Kori Koro
selling price. The company expected to sell 50,000 units Selling prices P20 P40
per month and planned its monthly results as follows: Variable costs 8 24

Sales P750,000 The sales for 2020 were in the ratio of 3 Kori to 1 Koro.
Variable costs 562,500 Sales volume for 2020 was P1 million. Fixed costs for
Contribution margin 187,500 2020 amounted to P390,000.
Fixed costs 90,000
Income before taxes 97,500 Requirements:
Income taxes 39,000 1. Compute the number of units sold in 2020 for each
Net income P 58,500 product.
2. Compute the breakeven sales in pesos and in units.
Requirements: 3. Compute the composite breakeven for the
company.

Page 2 of 7 www.teamprtc.com.ph MAS.3203

EXCEL PROFESSIONAL SERVICES, INC.

4. If the sales mix was to change to 2 units of Kori to The only personnel directly employed by the Pediatrics
1 unit of Koro, would this have any effect on the Department are supervising nurses, nurses, and aides. The
breakeven sales? If so, what would be the new hospital has minimum personnel requirements based on
breakeven sales? total annual patient days. The staffing levels below
5. Assuming that the sales volume would remain at P1 represent full-time equivalents, and it should be assumed
million, what net income would be generated using that the Pediatrics Department always employs only the
the sales mix in number (4) above? minimum number of required full-time equivalent
6. What sales revenue would be required if the firm personnel.
wishes to generate a net income of P328,900 if the
original mix of 3:1 prevailed? Annual salaries for each class of employee follow:
supervising nurses, P180,000; nurses, P130,000; and aides,
PROBLEM NO. 6. P50,000. Salary expense for the year ended June 30 for
Bruno Company and Berto Company both make rocking supervising nurses, nurses, and aides was P720,000,
chairs. They have the same production capacity, but Bruno P1,560,000, and P1,100,000, respectively.
is more automated than Berto. At an output of 1,000 chairs
per year, the two companies have the following costs: Hospital requirements beginning at the minimum, expected
Bruno Berto level of operation follow:
Fixed costs P400,000 P200,000
Variable costs at P100 per 100,000 Annual Patient Aides Nurses Supervising
chair Days Nurses
Variable costs at P300 per 300,000 10,000 – 21 11 4
chair 14,000
Total cost P500,000 P500,000 14,001 – 22 12 4
Unit cost (1,000 units) P500 P500 17,000
17,001 – 22 13 4
Requirements: 23,725
Assuming that both companies sell chairs for P700 each and 23,726 – 25 14 5
that there are no other costs or expenses for the two firms, 25,550
complete the following: 25,551 – 26 14 5
1. Which company will lose the least money if 27,375
production and sales fall to 500 chairs per year? 27,376 – 29 16 6
2. How much would each company lose at production 29,200
and sales level of 500 chairs per year?
3. How much would each company make at production The Pediatrics Department operated at 100% capacity
and sales levels of 2,000 chairs per year? during 111 days of the past year. It is estimated that during
90 of these capacity days, the demand average 17 patients
PROBLEM NO. 7. more than capacity and even went as high as 20 patients
Cabuyao Hospital operates a general hospital but rents more on some days. The hospital has an additional 20 beds
space and beds to separate entities for specialized available for rent for the coming fiscal year.
treatment such as pediatrics, maternity, psychiatric, etc.
Cabuyao charges each separate entity common services to Requirements:
its patients like meals and laundry and for all administrative 1. Compute the variable cost per patient days.
services such as billings, collections, etc. All uncollectible 2. How much were the total fixed costs for the
accounts are charged directly to the entity. Space and bed hospital’s pediatrics department during the year
rentals are fixed for the year. ended June 30?
3. What is the breakeven point for the year?
For the entire year ended June 30, the Pediatrics 4. Assume that the hospital operated last year at
Department at Cabuyao Hospital charged each patient an 11,000 patient days. How much total costs were
average of P650 per day, had a capacity of 60 beds, incurred for the Pediatrics department last year?
operated 24 hours per day for 365 days, and had revenue
of P10,676,250.

Expenses charged by the hospital to the Pediatrics

Department for the year ended June 30 were: MULTIPLE CHOICE QUESTIONS
Basis of Allocation
Patient Days Bed 1. Assuming a company has net income, which of the
Capacity following statements is true regarding the
Dietary P 328,500 contribution margin per unit?
Janitorial P 118,400 a. It will decrease as the number of units sold
Laundry 197,100 increases.
Lab, other than direct 410,625 b. It will decrease as the number of units sold
charges to patients decreases.
Pharmacy 410,625 c. It indicates the amount that net income will
Repairs and maintenance 65,700 66,045 increase with the sale of each additional unit.
General administrative 1,218,780 d. It indicates the amount that variable costs will
services decrease with the sale of each additional unit.
Rent 2,546,710
Billings and collections 689,850 2. At the break-even point, fixed cost is always
Bad debt expense 246,375 a. less than the contribution margin
Others 114,975 240,315 b. more than the contribution margin
Total P2,463,750 P4,190,250 c. equal to the contribution margin
d. more than the variable cost

Page 3 of 7 www.teamprtc.com.ph MAS.3203

EXCEL PROFESSIONAL SERVICES, INC.

b. a decrease in sales volume is expected

3. If a company raises its target peso profit, its c. the firm is very unprofitable
a. break-even point rises d. the firm has very high fixed costs
b. fixed costs increase
c. required total contribution margin increases 11. Leverage Company changed its cost structure by
d. selling price rises increasing fixed costs and decreasing its per-unit
variable costs. The change
4. One of the first steps to take when using CVP a. Increases risk and increases potential profit
analysis to help make decisions is: b. Increases risk and decreases potential profit
a. finding out where the total costs line intersects c. Decreases risk and decreases potential profit
with the total revenues line on a graph. d. Decreases risk and increases potential profit
b. identifying which costs are variable and which
costs are fixed. 12. If a company desires to increase its safety margin, it
c. calculation of the degree of operating leverage for should:
the company. a. increase fixed costs.
d. estimating how many products will have to be sold b. decrease the contribution margin.
to make a decent profit. c. decrease selling prices, assuming the price
change will have no effect on demand.
5. Which of the following would increase contribution d. stimulate sales volume.
margin per unit the most?
a. A 15% decrease in selling price 13. If unit outputs exceed the breakeven point
b. A 15% increase in variable expenses A. there is a loss.
c. A 15% increase in selling price B. total sales revenue exceeds total costs.
d. A 15% decrease in variable expenses C. there is a profit.
D. then both (b) and (c) are correct.
6. A company’s breakeven point in peso sales may be
affected by equal percentage increases in both 14. The margin of safety would be negative if a
selling price and variable cost per unit (assume all company('s)
other factors are equal within the relevant range). A. was presently operating at a volume that is below
The equal percentage changes in selling price and the break-even point.
variable cost per unit will cause the breakeven point B. present fixed costs were less than its contribution
in peso sales to margin.
a. Decrease by less than the percentage increase in C. Variable costs exceeded its fixed costs.
selling price. D. degree of operating leverage is greater than 100.
b. Decrease by more than the percentage increase in
the selling price. 15. If the sales mix shifts toward higher contribution
c. Increase by less than the percentage increase in margin products, the break-even point
selling price. A. decreases.
d. Remain unchanged. B. increases.
C. remains constant.
7. If a company’s variable costs are 70% of sales, which D. It is impossible to tell without more information.
formula represents the computation of peso sales
that will yield a profit equal to 10% of the 16. Which of the following items would not be considered
contribution margin when P equals sales in pesos for in cost-volume-profit analysis?
the period and FC equals total fixed costs for the A. Units of production
period? B. Fixed costs
a. P = .2/FC C. Product mix
b. P = FC/.2 D. Gross profit margin
c. P = .27/FC E. Variable costs
d. P = FC/.27
17. The break-even in units sold will decrease if there is
8. The contribution margin ratio always decreases when an increase in:
the A. unit sales volume.
a. Variable costs as a percentage of net sales B. total fixed expenses.
increase. C. unit variable expenses.
b. Variable costs as a percentage of net sales D. selling price.
decrease.
c. Breakeven point increases. 18. Which of the following represents the best definition
d. Breakeven point decreases. of contribution margin?
a. Difference between fixed costs and variable costs.
9. After the level of volume exceeds the breakeven b. Difference between revenue and fixed costs.
point c. Amount available to cover fixed costs and profit.
a. the contribution margin ratio increases d. Amount available to cover variable costs.
b. the total contribution margin exceeds the total fixed
costs 19. Which of the following statements about a firm with
c. total fixed costs per unit will remain constant zero fixed operating costs is true?
d. the total contribution margin will turn form negative a. Its degree of operating leverage (DOL) is greater
to positive than 1.
b. Its degree of operating leverage (DOL) is equal to
10. A managerial preference for a very low degree of 1.
operating leverage might indicate that c. Its degree of operating leverage (DOL) is equal to
a. an increase in sales volume is expected 0.

Page 4 of 7 www.teamprtc.com.ph MAS.3203

EXCEL PROFESSIONAL SERVICES, INC.

d. Its degree of operating leverage (DOL) is less Selling price P250 P350 P500
than 0. Variable cost 100 150 250
What is the composite break-even volume?
20. Big Bill Company has a negative margin of safety. a. 17,000 c. 1,700
Which of the following statements is false? b. 2,139 d. 9,471
a. A negative margin of safety implies that the
contribution margin is negative. 28. Bauan Company had a 25 percent margin of safety.
b. The company is incurring an operating loss. Its after-tax return on sales is 6 percent, and tax
c. The company will improve its profit if sales rate of 40 percent. What is Bauan’s contribution
volume increases. margin ratio?
d. The company must increase sales to achieve a. 40 percent c. 24 percent
“break-even.” b. 15 percent d. 60 percent

21. Domino Company’s operating percentages were as 29. Lemery Corporation had sales of P120,000 for the
follows: month of May. It has a margin of safety ratio of 25
Revenues 100% percent, and after-tax return on sales of 6 percent.
Cost of goods sold The company assumes its sales constant every
Variable 50% month. If the tax rate is 40 percent, how much is the
Fixed 10% 60% annual fixed costs?
Gross profit 40% a. P36,000 c. P432,000
Other operating b. P90,000 d. P360,000
expenses
Variable 20% 30. Lopez Company had a net loss of P3.00 per unit when
Fixed 15% 35% sales were 40,000 units. When sales were 50,000
Operating income 5% units, the company had a loss of P1.60 per unit. How
Domino’s sales totaled P2 million. At what revenue much is the contribution margin per unit of the
level would Domino break-even? product?
a. P1,900,000 c. P1,250,000 a. P1.40 c. P4.60
b. P1,666,667 d. P 833,333 b. P4.00 d. P1.75

22. For its most recent fiscal year, a firm reported that 31. The manager of Lucky Eleven Store reviewed the
its contribution margin was equal to 40% of sales following data:
and that its net income amounted to 10% of sales. Fruits Meat Canned
If its fixed costs for the year amounted to P60,000, Products
how much sales did the firm have? Contribution margin ratio 40% 50% 40%
a. P150,000 c. P600,000 Sales mix in pesos 20% 30% 50%
b. P200,000 d. Undeterminable Fixed costs, P1,290,000 per month.
The breakeven sales for each month is
23. Last year, Black Company had sales of P640,000, a a. P1,677,000 c. P4,500,000
contribution margin of P160,000, and a net loss of b. P3,000,000 d. P6,000,000
P40,000. Based on this information, the break-even
point was: 32. The following information is taken from Wampler
a. P640,000 c. P800,000 Co.'s contribution income statement:
b. P480,000 d. P960,000 Sales P200,000
Contribution margin 120,000
24. If the profit margin before tax is 8%, contribution Fixed costs 90,000
margin of 20%, and a margin of safety of P80,000. Income taxes 12,000
What is Cott's fixed cost? What was Wampler's margin of safety?
a. P16,000 c. P24,000 a. P50,000 c. P150,000
b. P80,000 d. P96,000 b. P168,000 d. P182,000

25. Mayo Enterprises has fixed costs of P120,000. At a 33. Austin Manufacturing, which is subject to an effective
sales volume of P400,000, return on sales is 10%; income tax rate of 40 percent, had the following
at a P600,000 volume, return on sales is 20%. What operating data for the accounting period just ended.
is the break-even volume? Selling price per unit P60
a. P160,000 c. P300,000 Variable cost per unit 22
b. P210,000 d. P350,000 Fixed-costs P504,000
Management plans to improve the quality of its sole
26. Cork Company breaks even at P300,000 sales and product by:
earns P40,000 at P400,000 sales. Which of the • Replacing a component that costs P3.50 with a
following is true? higher grade unit that costs P5.50; and,
a. Fixed costs are P120,000. • Acquiring a P180,000 packing machine with a 10-
b. Profit at sales of P500,000 would be P50,000. year useful life.
c. The selling price per unit is P4. If the company desires to earn after-tax income of
d. Contribution margin is 10% of sales. P172,800 in the upcoming period, it must sell:
a. 19,300 units d. 27,000 units
27. Molder Company manufactures and sells three b. 21,316 units e. 23,800 units
products: Good, Bad, and Ugly. Annual fixed costs c. 22,500 units
are P3,315,000, and data about the three products
follow. 34. The Rizal Marketing Company is expecting an
Good Bad Ugly increase of fixed costs by P78,750 upon moving their
Sales mix in units 30% 50% 20% place of business to the downtown area. Likewise, it

Page 5 of 7 www.teamprtc.com.ph MAS.3203

EXCEL PROFESSIONAL SERVICES, INC.

is anticipating that the selling price per unit and the a. No, because the margin of safety ratio of 17.2%
variable expenses will not change. At present, the is not better than 15%.
sales volume necessary to breakeven is P750,000 b. Yes, because the margin of safety ratio of 17.2%
but with the expected increase in fixed costs, the is better than 15%.
sales volume necessary to breakeven would go up to c. No, because the margin of safety ratio of 14.7%
P975,000. Based on these projections, what would is not better than 15%.
be the total fixed costs after the increase of P78,750? d. Yes, because the margin of safety ratio of 14.7%
a. P341,250 c. P262,500 is better than 15%.
b. P183,750 d. P300,000
40. Dull Store manufactures and sells dolls. The following
35. The following information pertains to Black Company information relates to the operating results for the last
Cost-volume-profit relationship quarter:
Break-even point in unit sold 1,000 Stuff toys sold 19,375
Variable costs per unit P500 Break-even point in number of toys 15,500
Total fixed costs P150,000 Break-even point in peso sales P65,875
How much will be contributed to profit before income Total fixed costs P47,275
taxes by the 1001st unit sold. What was Dull Store’s variable cost per doll?
a. P500 c. P150 A. P4.25 C. P1.20
b. P650 d. P 0 B. P3.05 D. P0.96

36. The Big & Sturdy Company manufactures an engine

for carpet cleaners called the "Snooper." Budgeted 41. Montemayor Co. had the following economic
cost and revenue data for the "Snooper" are given information for the year 2019:
below, based on sales of 40,000 units. Sales (50,000 units @ P20) P1,000,000
Sales P1,600,000 Variable costs 400,000
Less: Cost of goods sold 1,120,000 Fixed costs 250,000
Gross margin P 480,000 Income tax rate 40 percent
Less: Operating 100,000 Montemayor budgets its 2020 sales at 60,000 units
expenses or P1,200,000. The company anticipates an
Net income P 380,000 increased competition; hence, an additional P75,000
Cost of goods sold consists of P800,000 of variable advertising costs is budgeted in order to maintain its
costs and P320,000 of fixed costs. Operating sales target for 2020. Assuming the company can
expenses consist of P40,000 of variable costs and sell 60,000 units, what is the required selling price
P60,000 of fixed costs. What is the margin of safety in 2020 in order to equal the 2019 net income?
ratio based on the sale of 40,000 units? a. P20.00 c. P18.75
a. 100.00% c. 60.00% b. P19.25 d. P21.50
b. 50.00% d. 150.00%
Use the following information for the next three
37. A digitized music tuner has been a staple in Smooth questions.
Sounds' product line for several years. Annual fixed Ipil-ipil Corp. would like to market a new product at a
costs of production and administration related to this selling price of P15 per unit. Fixed costs for this product
product in the past have been P643,500. Variable are P1,000,000 for less than 500,000 units of output and
costs of production and sales have been P17 per unit. P1,500,000 for 500,000 or more units of output. The
The selling price in the past has been P28 per unit. contribution margin percentage is 20%.
For the year just ended, the company sold 100,000 42. What is the minimum number of units of this product
units. In the coming year, based on the appearance to be sold to breakeven?
of competing products on the market, the company a. 333,333 c. 500,000
expects a decrease of 10 percent in unit sales. b. 333,334 d. 416,667
Assuming that the company wants a profit before tax
of P405,000, what is the required selling price if it 43. How many units of this product must be sold to earn
expects to sell 90,000 units? a target operating income of P200,000?
a. P28.65 c. P25.60 a. 400,000 c. 483,334
b. P27.95 d. P30.80 b. 566,667 d. Cannot be determined

38. A manufacturer contemplates a change in technology 44. How many units of this product must be sold to earn
that would reduce fixed costs from P800,000 to a target operating income of P1 million?
P700,000. However, the ratio of variable costs to a. 666,667 c. 833,334
sales will increase from 68% to 80%. What will b. 750,000 d. Cannot be determined
happen to breakeven level of revenues?
a. Decrease by P301,470.50. Use the following information for the next five
b. Decrease by P500,000. questions.
c. Decrease by P1,812,500. Coleman Company manufactures and sells adjustable
d. Increase by P1,000,000 canopies that attach to motor homes and trailers. The
market covers both new units as well as replacement
39. Metaphor Company is considering discontinuing a canopies. Coleman developed its business plan based on
certain product line if it does not have a margin of the assumption that canopies would sell at a price of P800
safety higher than 15%. The breakeven sales are each. The variable cost of each canopy is projected at
P76,800, and the margin of safety is P13,200. Based P400, and the annual fixed costs are budgeted at
on this information, the controller has recommended P200,000. Coleman’s after-tax profit objective is
that Metaphor keep this product line. Did the P480,000; the company’s tax rate is 40 percent.
controller make the appropriate decision?

Page 6 of 7 www.teamprtc.com.ph MAS.3203

EXCEL PROFESSIONAL SERVICES, INC.

While Coleman’s sales usually rise during the second to project the current year’s after-tax net income of
quarter, the May financial statements reported that sales P110,400.
were not meeting expectations. For the first five months
of the year, only 350 units had been sold at the Manufacturers of candy have announced that they will
established price, with variable costs as planned. It was increase prices of their products an average of 15% in the
clear the after-tax profit projection would not be reached coming year due to increases in raw material (sugar, cocoa,
unless some actions were taken. The company president peanuts, etc.) and labor costs. Candyman Company
assigned a management committee to analyze the expects that all other costs will remain at the same rates or
situation and develop several alternative courses of levels as the current year. Candyman is subject to 40
action. The following mutually exclusive alternatives were percent tax rate.
presented to the president.
Average selling price P4.00 per box
Alternative 1. Reduce the sales price by P80. The sales Average variable costs
organization forecasts that with the significantly reduced Cost of candy P2.00 per box
sales price, 2,700 units can be sold during the remainder Selling expenses 0.40 per box
of the year. Total fixed and variable unit costs will stay Total P2.40 per box
as budgeted.

Alternative 2. Lower variable costs per unit by P50 Annual fixed costs
through the use of less expensive raw materials and Selling P160,000
slightly modified manufacturing techniques. The sales Administrative 280,000
price would also be reduced by P60, and sales of 2,200 Total P440,000
units for the remainder of the year are forecast. Expected annual sales
volume (390,000 boxes) P1,560,000
Alternative 3. Cut fixed costs by P20,000 and lower the
sales price by 5 percent. Variable costs per unit will be 50. What is the breakeven point in units before a 15%
unchanged. Sales of 2,000 units are expected for the increase in prices?
remainder of the year. a. 200,000 c. 175,000
b. 275,000 d. 100,000
45. If no changes are made to the selling price or cost
structure, what is the number of units that Coleman 51. If fixed costs double, what happens to the breakeven
Company must sell in order to breakeven? point?
a. 400 units c. 500 units a. Increases but by less than a factor of two
b. 450 units d. 550 units b. Decreases by less than a factor of two
c. Increases by a factor of two
46. If no changes are made to the selling price or cost d. Decreases by a factor of two
structure, what is the number of units that Coleman
Company must sell in order to achieve its after-tax 52. If the current contribution margin ratio is
profit objective? maintained, what would be the selling price of the
a. 1,700 units c. 2,500 units candy to cover the 15 percent increase in variable
b. 2,000 units d. 3,500 units costs?
a. P4.00 c. P4.60
47. How much would be the after-tax profit if Coleman b. P4.15 d. P4.50
Company implements alternative 1?
a. P321,600 c. P804,000 53. If candy costs increase 15 percent but the selling
b. P482,400 d. P398,400 price remains at P4.00 per box, what will be the
breakeven point in units?
48. How much after-tax profit would Coleman Company a. 338,462 c. 285,715
earn if it implements alternative 2? b. 346,457 d. 305,556
a. P319,200 c. P478,800
b. P394,800 d. P658,000 54. If the candy costs remain constant but the selling
price increases 15 percent, what will be the
49. How much would be the after-tax profit if Coleman breakeven point in peso sales?
Company implements alternative 3? a. P648,000 c. P920,000
a. P272,000 c. P403,000 b. P838,462 d. P1,556,953
b. P399,600 d. P408,000
55. If net income after taxes is to remain the same after
Use the following information for the next six questions. the cost of candy increases but no increase in the
Candyman Company is a wholesale distributor of candy. sales price is made, how many boxes of candy must
The company services grocery, convenience, and drug Candyman sell?
stores in Metro Manila. a. 480,000 c. 27,600
b. 400,000 d. 29,300
Small but steady growth in sales has been achieved by the
company over the past few years while candy prices have
been increasing. The company is formulating its plans for – end -
the coming fiscal year. Presented below are the data used

Page 7 of 7 www.teamprtc.com.ph MAS.3203