Exercise 3 (Break-even and Target Analysis)

Selling Price per unit ₱900.00

Variable Cost per unit ₱630.00
Fixed Expenses per month ₱1,350,000.00

Required #1

BEP = Total Fixed Cost/Contribution margin per unit

BEP (units) = 1,350,000/270 5,000 units

BEP (pesos) = 1,350,000/1 - (630/900) ₱4,500,000.00

or
BEP = (number of lanterns) 5,000
Multiply by: Selling price of lanterns 900
BEP (total sales) ₱4,500,000.00

Required #2

When the variable expenses per lantern increase as percentage of the selling price, it will result
to higher break-even point. It is because when the variable expenses increases, the contribution
margin will decrease. And when the contribution margin decrease, the company should sell more
of their products to cover their fixed expenses and attain break-even.

Required #3
Rojo Products
Income Statement under Present Operating Conditions

Per Unit
Sales P 900
Less: Variable Expenses 630
Contribution Margin P270
Less: Fixed Expenses
Net Income

*Sales = 8,000 x 900

*Variable Expenses = 8,000 x 630
Rojo Products
Income Statement after the Proposed Changes

Per Unit
Sales 810
Less: Variable Expenses 630
Contribution Margin 180
Less: Fixed Expenses
Net Income

*Sales = 8,000 x (100% + 25%) 10,000 units

*Variable Expenses = 10,000 x 630 6,300,000.00

*Selling Price per unit = 900 x 90% 810

Required #4

New Selling Price 810.00

Less: Variable Cost per unit 630.00
Contribution Margin per unit 180.00

Fixed Expenses per month ₱1,350,000.00

Add: Net Operating Income 720,000.00
Contribution Margin ₱2,070,000.00

Contribution Margin ₱2,070,000.00

Divided by: CM per unit 180.00
Number of lanterns to be sold 11,500
 Exercise 4 (Operating Leverage)

Selling Price ₱600.00

Variable Cost ₱420.00
Fixed Cost 4,500,00.00

Required #1
A. Mega Doors
Contribution Format Income

Sales
Less: Variable Cost
Contribution Margin
Less: Fixed Cost
Net Operating Income

*Sales = 30,000 x 600

*Variable Cost = 30,000 x 420

e selling price, it will result
ncreases, the contribution
e company should sell more
B.
Operating Leverage = Contribution Margin/Profit or Net Operating Inco
Operating Leverage = 5,400,000 / 900,000

s Required #2
Operating Conditions
A. Expected Increase in Percentage = 25% x 6

Total B. Expected Total Peso = 900,000 x (100% + 150%)

₱7,200,000.00
5,040,000
₱2,160,000.00
1,350,00.00 Exercise #5 (Multiproduct Break-even Analysis)
₱810,000.00

Model E700
 Sales ₱700,000.00
s Contribution Margin Ratio 60%
roposed Changes
The company fixed expenses total P598,500.00 per month

Total Required #1
₱8,100,000.00 Jokie Ent
6,300,000.00 Income St
₱1,800,000.00
1,350,00.00
₱450,000.00 Model E700
Amount %
Sales ₱700,000.00 100%
Less: Variable Expenses 280,000 40%
Contribution Margin ₱420,000.00 60%
Less: Fixed Expenses
Net Operating Income

Required #2

BEP = Total Fixed Cost/ Weighted Contribution Margin Ratio

BEP = 598,500/63% ₱950,000.00

Required #3

Additional Sales ₱50,000.00

Contribution Margin Ratio 63%
Increase in Net Operating Income ₱31,500.00

Assuming there is no changes in variable expenses, fixed expenses and sales mix,
the net operating income will increase by P31,500 when the sales increase 50,000
per month.
 Mega Doors
ntribution Format Income Statement

₱18,000,000.00
12,600,000.00
₱5,400,000.00
4,500,000.00
₱900,000.00

ofit or Net Operating Income

150%

₱2,250,000.00

Model JI500 Total

 ₱300,000.00 ₱1,000,000.00
70%

per month

Jokie Enterprises
Income Statement

Model JI500 TOTAL

Amount % Amount %
₱300,000.00 100% 1,000,000.00 100%
90,000 30% 370,000 37%
₱210,000.00 70% 630,000 63%
598,500.00
₱31,500.00

expenses and sales mix,

he sales increase 50,000