Case 6 Golden Flower Shop buys and sells floral arrangements. The average selling price is P30, and average purchase cost is P10. Weekly fixed costs are P3,000. Because the arrangements are perishable, the shop cannot sell any units after they have been in inventory for one week. The shop must order a full week's supply at one time. Mr. Golden, the owner would like to earn P1,000 per week from the business. A friend has explained CVP analysis to him and made the following calculation. ( 20 pts) Unit volume required for P1,000 profit = 3,000 - 1,000 30 - 10 = 200 arrangements

Required:

1) Is the presentation of equation correct in the sense that If Mr. Golden orders 200 arrangements per week he will earn P1,000? Why or why not? Justify.

2) Is the purchase cost fixed or variable? Explain.

3) Can you tell Mr. Golden how many arrangements he must sell to earn P1,000 if he purchases 300? Or if he purchases 400? Present analysis.