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(1.) The Taylor Radio Company manufactures and sells ultrasonic radios at P650 each. The variable manufacturing costs per unit are: direct materials = P200,
(1.) The Taylor Radio Company manufactures and sells ultrasonic radios at P650 each. The variable manufacturing costs per unit are: direct materials = P200, direct labor = P150, FOH = P50, and selling & administrative expenses P50. The fixed FOH is about P500,000 and fixed selling & administrative expenses P500,000. (a) What is the annual BEP in units and sales? (b) What profit will Taylor earn at 10,000 units? (c) How much will Taylor's profit increase/decrease (compared to b) if there is a: (c1) 15% reduction in selling price, and (c2) 10% increase in direct labor cost? (d) Taylor anticipates sales of 15,000 units during the coming year, what would be the margin of safety? (e) What unit sales volume is necessary to earn P500,000? (2.) A firm producing garbage waste disposal units sell it for P30,000 each. Variable costs are P20,000 per unit and fixed costs are P600,000. The plant can produce a maximum of 80 units per year. It is currently operating at 60% capacity. The firm is contemplating the effects of reducing the selling price by P2,000 per unit, adding a feature to each unit which will increase variable costs by P1,000 per unit, and allocating an extra of P100,000 per year for advertising. What effects will these measures have on the BEP and annual profit if together they cause the plant utilization to climb to 90%?
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Step: 1
a To calculate the annual breakeven point BEP in units and sales we need to use the following formula BEP in units Fixed Costs Selling Price Variable ...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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