A Manufacturing Company is considering for 1991 the purchase of additional equipment costing P180,000. This new equipment are expected to improve production volume and sales by 50%. Fix factory overhead, however is also expected to increase by P37,500. Total assets of the company before the purchase of new equipment is P720,000. Cost data provided by the accountant are as follows:

Sales (75,000 units at P12/unit P 900,000Cost of Sales: Materials and Labor375,000 Fix Factory Overhead75,000 Variable Factory overhead112,000562,500Gross Profit 337,500Selling & Administrative Costs67,500 Fix Costs45,000112,500 Variable Costs 225,000Net Profit on Sales

Note: Disregard income tax in the computation.

Required:

1. What is the 1990 asset turnover rate of the company?
2. 1.00 times
3. 1.25 times
4. 1.50 times
5. 1.75 times

1. What is the 1990 rate of return on capital employed?
2. 25%
3. 27.5%
4. 31.25%
5. 41.25%

1. What is the new net profit on sales based on the plan of expanding production facilities.
2. P325,000
3. P337,000
4. P371,000
5. P471,250