Acctg7 Q4

Name: ___________________________________ Date: ________

Problem 1
The BEP Company plans to market a new product. Based on its market studies, BEP estimates
that it can sell 70,000 units in 2015. The selling price per unit is P2.00. Variable cost ratio is
40% of sales. Fixed costs are estimated to be P60,000.
Required: Compute the
1. Break-even point in units
2. Break-even point in pesos

Problem 2
The following information pertain to Ethan Company:
AAA BBB CCC
Selling price per unit P 40 P 60 P 50
Variable cost per unit P 32 P 42 P 30
Sales mix ratio 3 2 1
Total fixed cost P 120,000
Required: Compute the
1. Composite contribution margin (or contribution margin per mix).
2. Number of sales (or mixes) to break-even (or composite units to break-even).
3. Individual break-even point units and in pesos.

Problem 3
In a recent period, Zero Company had the following experience:
Fixed Variable
Sales (10,000 at P200) P 2,000,000
Operating Costs:
Materials P 200,000
Labor 400,000
Overhead P 160,000 600,000
Administrative Expenses 180,000 80,000
Other Expenses 200,000 120,000
Total P 540,000 P 1,400,000 1,940,000
Net Income P 60,000
Required:
1. Compute the break-even point in units and in pesos.
2. Compute the desired sales in pesos and in units to generate a net income of P96,000.
Ignore income taxes.
3. Compute the desired sales in pesos and in units to generate income net of tax of P84,000.
Assume an income tax rate of 30%.
Acctg7 Q4

Problem 4
Company A sells its product at P25 per unit. Monthly fixed costs composed of manufacturing
P150,000, and selling and administrative costs P350,000. Variable costs amount to P15.00 per
unit, composed of P6.00 selling and administrative costs and P9.00 manufacturing. The
company expects to sell 60,000 units of product in the coming month.

Required:
1. Compute the break-even point in units and pesos.
2. Consider the changes in the profit factors described in the independent cases given below
and prepare/compute the following:
 Direct costing income statement (show the amounts in total, and in per unit)
 Break-even point in units and in pesos
a. Selling price per unit will decrease by 20%, resulting into an 80% increase in volume.
b. Fixed selling and administrative cost will go down by P150,000. This will cut
production and sales volume by 30%.
c. Included in the P6.00 variable selling and administrative cost is salesmen’s
commission of P2.00 per unit. In the coming month, these salesmen will be paid
fixed salary of P30,000 (total amount) instead of the commission of P2.00 per unit.
This change in payment scheme is expected to decrease volume by 10,000 units.

Problem 5
MS Company’s break-even sales are P528,000. The variable cost ratio to sales is 60%, while the
net income percentage to sales is 8%.
Required: Compute the following
1. Margin of safety ratio
2. Actual sales
3. Margin of safety
4. Fixed costs
5. Net operating income
6. Total contribution margin
7. Degree of operating leverage

Problem 6
TS Company sells Product A for P60 each. Variable costs are P36 per unit. Fixed costs are
P375,000.
Required: Compute the desired sales in units and in pesos to realize a
1. Net income of P102,000 before income taxes
2. Net income of 15% of sales. Ignore income taxes.