ANSWER PROBLEMS FROM 1-26

1. Tierra Company prepared the following preliminary forecast concerning Product X for 2017 assuming no expenditure for advertising: Selling price per unit P10 Unit sales 100,000 Variable costs P600,000 Fixed costs P300,000 Based on a market study in December 2016, Tierra estimated that it could increase the unit selling price by 15% and increase the unit sales volume by 10% if P100,000 was spent in advertising. Assuming that Tierra incorporated these changes in its 2017 forecast, what should be the operating income from Product X? a. P175,000 C. 205,000 b. P190,000 d. P365,000 2. Darigold, Inc., sells Product M for P5 per unit. The fixed cost is P210,000 and the variable cost is 60% of the selling price. What would be the amount of sales if Darigold is to realize a profit of 10% of sales? a. P700,000 C. P472,500 b. P525,000 d. P420,000 3. Dukha Company is considering a proposal to replace existing machinery used for the manufacture of Product E. The new machines are expected to cause increased annual fixed cost of P120,000; however, variable cost should decrease by 20% due to a reduction in direct- labor hours and more efficient usage of direct materials. Before this change was under consideration, Dukha had budgeted Product E sales and costs for 2016 as follows: Sales P2,000,000 Variable cost 70% of sales Fixed cost P400,000 Assuming that Dukha implemented the above proposal by January 1, 2016, what would be the increase in budgeted operating profit for Product E for 2016? a. P160,000 C. P360,000 b. P280,000 d. $380,000of June 2016: 4. Remar, Inc. reported the following results from sales of 5,000 units of Product C for the month Sales P200,000 Variable cost 120,000 Fixed cost 60,000 Operating income 20,000 Assume that Remar, Inc. increases the selling price of Product C by 10% on July 1, 2016. How many units of Product C would have to be sold in July 2016 in order to generate an operating income of P20,000? . 4,000 C. 4,500 b. 4,300 d. 5,000 5. Araw Corporation is planning its advertising campaign for 2015 and has prepared the following budget data based on a zero advertising expenditure: Normal plant capacity 200,000 units Sales 150,000 units Selling price P25 per unit Variable manufacturing cost P15 per unit Fixed cost: Manufacturing P800,000 Selling & administrative P700,000 An advertising agency claims that an aggressive advertising campaign would enable Araw to increase its unit sales by 20%. What is the maximum amount that Araw can pay for advertising and obtain an operating profit of P200,000? a. P100,000 C. P300,000 b. P200,000 d. 1'550,000 6. In planning its operations for 2017 based on a sales forecast of P6,000,000, Thone, Inc., prepared the following estimated data: COST AND EXPENSES Variable Fixed Direct materials P1,600,000 Direct labor 1,400,000 Factory overhead 600,000 P 900,000 Selling expenses 240,000 360,000 Administrative expenses 60,000 140.000 P3,900.000 P1, 400.000 What would be the amount of sales in pesos at the break-even point? a. P2,250,000 C. P4,000,000 b. P3,500,000 d. P5,300,000 7. Merissa Company is planning to sell 100,000 units o Product Y for P12 a unit. The fixed cost is P280,000. In order to realize a profit of P200,000, what would the variable cost be? a. P480,000 C. P300,000 b. P720,000 d. P220,000 8. Bibot Company has projected cost of goods sold of P4,000,000, including fixed cost of P800,000 Variable cost is expected to be 75% of net sales, What will be the projected net sales? a. P4,266,667 C. P3,333,333 b. P4,800,000 d. P4,400,000 9. The Little Star Company is planning to sell 200,000 units of Product M. The fixed cost is P400,000 and the vanable cost is 609% of the selling price In order to realize a profit of P100,000, the selling price per unit would have to be a. P3.75 P6.00 b. P4.17 P6 25Bruto, Inc. produces only two products, Popeye and Olive. These account for 60% and 40/ of the total sales in pesos of Bruto, respectively. Variable costs (as a percentage of sales) in pesos are 60% for Popeye and 85% for Olive. Total fixed cost is P150,000. There are no other costs. 10. What is Bruto's break-even point in sales (in pesos)? a. P150,000 C. P300,000 b. P214,286 d. P500,000 11. Assuming that the total fixed cost of Bruto increases by 30%, what amount of sales in pesos would be necessary to generate a net income of P9,000? a. P204,000 C. P650,000 b. P434,000 d. P680,000 12. The Riverwild Company sells Chitty for P6 per unit. Variable cost is P2 per unit. Fixed coxx is P37,500. How many Chittys must be sold to realize a profit before income taxes of 15% of sales? a. 9,375 units C. 12,029 units b. 9,740 units d. 12,097 units 13. At a break-even point of 400 units sold, the variable cost is P400 and the fixed cost is P200. What will the 401* unit sold contribute to profit before income taxes? a. PO C P1.00 b. P0.50 d. P1.50 14. How may the following be used in calculating the break-even point in units? Fixed costs CM per unit Fixed costs CM per unit a. Denominator Numerator C. Numerator Not used b. Denominator Not used d. Numerator Denominator 15. Within the relevant range, the amount of variable cost per unit a. differs at each production level. b. remains constant at each production level. C. increases as production increases. decreases as production increases. 16. If the fixed cost attendant to a product increases, while variable cost and sales price remain constant, what will happen to (1) contribution margin and (2) break-even point? Contribution Margin Break-even Point a. Increase Decrease b . Decrease Increase C. Unchanged Increase d. Unchanged Unchanged 17. Miller, Inc. sells Products X, Y, and 2. Miller sells three units of X for each unit of Z and two units of Y for each unit of X. The contribution margins are P1 per unit of X, P1.50 per unit of Y, and P3 per unit of Z. Fixed costs are P600,000. How many units of X would Miller sell at the break-even point? a. 40,000 c. 360,000 b. 120,000 d. 400,000 18. The Vetron Company is planning to produce two products, Tig and Lam. Vetron is planning to sell 100,000 units of Tig at P4 a unit and 200,000 units of Lam at P3 a unit. Variable cost is 70% of sales for Tig and 80% of sales for Lam. In order to realize a total profit of P160,000, what must the total fixed cost be? a. P80,000 P240,000 b. P90,000 d P600,00019. The contribution margin increases when sales volume remains the same and a. variable cost per unit decreases c. fixed cost decreases b. variable cost per unit increases d. fixed cost increases 20. Wacky Company is a medium-sized manufacturer of lamps. During 2016, a new line called "Daylights" was made available to Wacky customers. The break-even point for sales of Daylight is P400,000 with a contribution margin of 40%. Assuming that the operating profit for the Daylight line for 2016 amounted to P200,000, total sales for 2016 would amount to a. P600,000 C. P900,000 b. P840,000 d. P950,000 ITEMS 21 TO 23 ARE BASED ON THE FOLLOWING INFORMATION: Preview Company sold 100,000 units of its product at P20 per unit. Variable cost is P14 per unit (manufacturing cost of P11 and selling cost of P3). Fixed cost is incurred uniformly throughout the year and amounts to P792,000 (manufacturing cost of P500,000 and selling cost of P292,000). There are no beginning inventories. 21. The break-even point for this product is a. P2,640,000 or 132,000 units C. P1,800,000 or 90,000 units b. P2,600,000 or 130,000 units d. P1,700,000 or 88,000 units 22. The number of units that must be sold to earn a net income of P60,000 for the year before income taxes would be a. 142,000 C. 100,000 b. 132,000 d . 88,000 23. If labor cost is 50% of variable cost and 20% of fixed cost, a 10% increase in wages and salaries would increase the number of units required to break-even (in fraction form) to a. 807,840/5.3 C. 807,840/14.7 b. 831,600/5.178 d. 831,600/14.28 24. The Cor Company plans to market a new product. Based on its market studies, Cor estimates that it can sell 5,500 units in 2016. The selling price will be P2 per unit. Variable cost is estimated to be 40% of the selling price. Fixed cost is estimated to be P6,000. What is the break-even point? a. 3,750 units c. 5,500 units b. 5,000 units d. 7,500 units 25. The Pad Company sells Pajax for P6 per unit. Variable cost is P2 per unit. Fixed cost is P37,500. How many Pajax must be sold to realize a profit before income taxes of 15% of sales? a. 9,375 units C. 11,029 units b. 9,740 units cl. 12,097units 26. Information concerning Siko Corporation's Product X is as follows: Sales P300.000 Variable costs P240,000 Fixed costs P 40,000 Assuming that Siko increases sales of Product X by 20%. What should the net income from Product X be? a. P20,000 c. P32,000 b. P24,000 d. P80,000 27. The Manilad Corporation sells each unit of output for P75. For output up to 40,000 units, fixed cost is P225,000. Variable cost Is P30 per unit. What is the firm's gain or loss at a sales level of 10,000 units