COST-VOLUME-PROFIT ANALYSIS

EXCERCISE 1

Lee Gon Corporation has the following revenue and cost characteristics on their only product:

Selling price per unit P 6.00

Variable cost per unit P 4.20

Annual fixed costs P 360,000

Annual volume270,000 units

Required:

1.For each of the following independent cases, determine the new contribution margin ratio, break-even point in pesos, and net profit.

a.5% increase in selling price

b.20% increase in variable costs

c.50% increase in fixed costs

d.5% increase in sales and production volume

e.Decrease of P30,000 in fixed costs

f.Decrease in variable costs of P0.20

g.Decrease in variable costs of P0.60 and 20% increase in selling price

h.20% decrease in fixed costs and 20% increase in variable cost.

2.Which among the various changes above will be the most beneficial to the company and which one will be the most detrimental? Justify your answer.