Amswer the following Cost Volume Profit Analysis Problems from 56-78

56. Assuming that the flexible budget is in use, when production level is expected to increase within a relevant range, the expected effect on fixed cost per unit (FCU) and variable cost per unit (VCU) would be: a. FCU, to decrease and VCU, to decrease b. FCU, to decrease and VCU, no change c. FCU, no change and VCU, no change d. FCU, no change and VCU, to decrease 57. Neth and Company has sales of P400,000 with variable cost of P300,000, fixed cost of P120,000, and an operating loss of P20,000. By how much would Neth need to increase its sales in order to achieve a target operating income of 10% of sales? a. P400,000 C. P500,000 b. P462,000 d. P800,000 58. When using the graph method, if unit output exceeds the break-even point, a. expenses are extremely high relative to revenues. b. there is loss because the total cost line exceeds the total revenue line. c. total sales exceeds total cost. d. there is profit since the total cost line exceeds the total revenue line. 59. The most important use of the cost-volume-profit graph is to show a. the break-even point b. the cost/margin ratio at various levels of sale activity c. the relationships among volume, costs, revenues over wide ranges of activity d. the determination of cross-over point 60. Which of the following formulas is used to determine the break-even point when using the contribution margin method? a. Revenues less operating income equals variable cost plus fixed cost b. Unit contribution margin times the break-even number of units equals fixed cost. C. Selling price less unit fixed cost equals contribution margin d. Total fixed cost equals total revenues 61. Ipo-ipo Corporation would like to market a new product at a selling price of P15 per unit. Fixed cost for this product is P1,000,000 for less than 50,000 units of output and P1,500,000 for 500,000 or more units of output. The contribution margin percentage is 20%. How many units of this product must be sold to earn a target operating income of P1 million? a. 754,900 C. 825,530 b. 833,334 d. 785,320 62. The following data refer to cost-volume-profit relationship of K Co. Break-even point in units :,000 Variable cost per unit 1 250 Total fixed cost P75,000 How much will be contributed to operating income by the 1,001st unit sold? a. P250 C. P75 b. P325 d, zero 63. Which of the following statements is true? a. A shift in sales mix toward less profitable products will cause the over-all break-even point to fall. One way to compute break-even point is to divide total sales by the cost margin ratio. C. Once the break-even point has been reached, net income will increase by the unit contribution margin for each additional unit sold. d. As sales exceed the break even point, a high contribution margin ratio will result in lower profit, rather than a low contribution margin ratio. 64. When used in cost-volume profit analysis. Sensitivity analysis a. determines the most profitable mix of products to be sold.b. allows the decision makers to introduce probabilities in the evaluation of decision alternatives. C. computes profit per unit of production and determines the optimum production of the company. d. is done through various possible scenarios and computes the impact on profits of various predictions of future events. 65. Sats & Co. sells three products: Sim, Plu, and Cop. Sim is the most profitable product while Cop is the least profitable. Which one of the following events will definitely decrease the firm's over-all break-even point for the upcoming accounting period? a. An increase in the over-all market for Plu. b. A decrease in Cop's selling price. C. An increase in anticipated sales of Sim relative to the sales of Plu and Cop. d. An increase in Sim's raw material cost. 66. A new product, DVD, will be marketed for the first time by Tunog, Led. during the next year. Although the Sales Department estimates that 35,000 units could be sold at P72 per unit, the management has allocated only enough manufacturing capacity to produce a maximum of 25,000 units of the new product annually. The fixed cost associated with the new product is budgeted at P900,000 for the year, which Includes P120,000 for depreciation on the new manufacturing equipment Each unit of product costing is presented below. The company is subject to a 40% income tax rate. Variable Cost Direct materials P14.00 Direct labor 7,00 Manufacturing overhead 8.00 Total variable manufacturing overhead cost P29,00 Selling expenses 3.00 TOTAL VARIABLE COST P32.00 The management ruled that it will not allow the commercial production of the product after the next fiscal year unless the after tax profit is at least P150,000 during the first year. The unit selling price to achieve this required profit must be at least: a. P75.00 C. P83.00 b. P78.00 d P74.00 67. Cost-volume-profit analysis is a key factor in many decisions including choice of product lines, pricing of product, marketing strategy, and utilization of productive facilities. A calculation used in a CVP analysis is the break-even point Once the break even point has been reached, operating income will increase by the: a. sales price per unit for each additional unit sold. b. contribution margin per unit for each additional unit sold. c. fixed cost per unit for each additional unit sold d. gross margin per unit for each additional unit sold. 68. To reduce the break-even point, the company may a, decrease both fixed cost and the contribution margin b. increase both fixed cost and the contribution margin c. decrease the fixed cost and Increase the contribution margin. d. increase the fixed cost and decrease the contribution margin. 69. For a profitable company, the amount by which sales can decline before losses occur is known as the: a. Variable sales ratio c Sales volume variance b Margin of safety d. Marginal income tax 10. The following revenue and cost budgets for the two products that Baggs, Inc. sells are made available Plastic bagsSales price P 50.00 P 75.00 Direct materials (10.00) (15.00) Direct labor (15.00) (25,00) Fixed overhead (15.00) (20.00) Net income per unit 10.00 15.00 Budgeted unit sales 150,000 300,000 The budgeted unit sales equal the current unit demand and total fixed overhead for the year is budgeted at P4,875,000. Assume that the company plans to maintain the same proportional mix. In numerical calculations, the company rounds to the nearest centavo and unit. The total number of units Baggs, Inc. needs to produce and sell to break-even is: a. 102,632 units C. 171,958 units b. 153,947 units d. 418,455 units 71. Games Corp. expected to sell 150,000 board games in July. Its master budget related to the sale and production of these items is presented below. IN THOUSAND PESOS Revenue 480 Cost of goods sold: Direct materials 135 Direct labor 60 Variable overhead 90 Total cost of goods sold 285 Contribution margin 195 Fixed overhead 50 Fixed selling/administrative costs 100 150 Operating income 45 July's sales registered at 180,000 board games. Using a flexible budget, the company expects the operating income for July to be: a. P102,000 C. P84,000 b. P270,000 d. P45,000 72. For the period just ended, Chanda, Inc. generated the following results in percentages: Revenues 100% Cost of sales: Variable 50% Fixed 10 Total 60 Gross profit 40% Operating expenses. Variable 20% Fixed 15 Total 35 Operating income 5% Total sales amounted to P3 million. At what level is break-even sales? a. P3,750,000 C P1,875,000 b. P2,500,000 d. P2,850,000 73. In a multi-product company, as the mix of the products being sold changes, the over-all contribution margin ratio will also change. If the shift in mix is toward less profitable products, then the contribution margin ratio will a. rise C Not change b. change in direct proportion d fall to break-even point74. Rings, Etc., Inc. manufactures and sells key rings embossed with college names and slogans. Last year, the key rings sold for P75 each, and the variable cost to manufacture them was P22.50 per unit. The company needed to sell 20,000 key rings to break-even. The net income last year was P50,400. The company expects the following for the coming year: 1. The selling price of the key rings will be P90. 2. Variable manufacturing cost per unit will increase by one third. 3. Fixed cost will increase by 10%. 4 . The income tax rate will remain unchanged. For the company to break-even for the coming year, the company should sell a. 22,600 units c. 19,250 units b. 21,250 units d. 21,600 units 75. The rate or amount that sales may decline before losses are incurred is called: a. residual income rate C. sensitive level of income b. variable sales ratio d. margin of safety 76. The following data pertain to the two products manufactured by Dipa, Inc. PER UNIT Product Selling price Variable cost U P 240 P140 P 1,000 400 Fixed cost totals P600,000 annually. The expected sales mix in units is 60% for Product U and 40% for Product P. How many units of the two products together must Dipa sell to break- even? a. 857 C. 2,000 b. 2,459 d. 1,111 77. Total unit cost is a. needed for determining product contribution b. irrelevant in marginal analysis c. independent of the cost system d. relevant for cost-volume-profit analysis ITEMS 78 to 80 ARE BASED ON THE FOLLOWING INFORMATION: Chuchay Manufacturing Company produces two products for which the following data have been tabulated. Fixed manufacturing cost is applied at a rate of P1.00 per machine hour. Per unit Chu Chay Selling price P4.00 P3 00 Variable manufacturing cost 2.00 1 50 Fixed manufacturing cost 0.75 0.20 Variable selling cost 1.90 1 00 The sales manager has had a f160,900 mcrease in the budget allotment for advertising and wants to apply the money to the most profitable product. The products are not substitutes for one another in the eyes of the company's customers. 78. Suppose the sales manager chooses to devote the Entire P160,000 to increased advertising for Chu. The minimum increase in seles units of Chu required to offset the increased advertising IS a. 640,000 units 28,000 units b. 160,000 units 90,000 units