5.The offers of M Company are reviewing the profitability of the company's four products and the potential effects of several proposals for varying the product mix.An excerpt from the income statement and other data follow:

TotalsProduct PProduct QProduct RProduct S

RevenuesP62,600P10,000P18,000P12,600P22,000

Cost of goods sold44,2744,7507,05613,96818,500

Gross ProfitP18,326P 5,250P10,944P(1,368)P 3,500

Operating expenses12,0121.9902,9762,8264,220

Income before taxesP 6,314P 3,260P 7,968P(4,194)P (720)

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Units sold1,0001,2001,8002,000

Sales price per unitP10.00P15.00P7.00P11.00

Variable cost of goods sold per unit2.503.006.506.00

Variable operating expenses per unit1.171.251.001.20

Ignore income taxes.If Product R is discontinued and a consequent loss of customers causes a decrease of 200 units in sales of Q. How much is the total effect on income of M Company?

8.Chlie Corporation produces a single product which currently sells for P5.00.Fixed costs are expected to amount P60,000 for the year and variable costs are expected to be P3.00 per unit.In addition Chlie has two salespersons who are paid strictly on a commission basis.Their commissions is 10% of the sales pesos they generate .

If Chlie alters its current plans by spending an additional amount of P5,000 on advertising and increases its selling price to P6 per unit, its net income on 60,000 units would be?

4.M Company currently sells 200 units of product M for P1.00.Varaible costs are P0.40, avoidable fixed costs are P40.00, unavoidable allocated fixed costs are P100.00.A chain store has offered P0.75 per unit for 40 units of product M.Management feels they will lose 18 units of regular price, if they accept the order.Calculate the selling price they must charge the special order in order to increase income by P10.00.

Answer