Neptune Company Produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the

company is anxious to produce and sell. The new toy will sell for P3 per unit. Enough capacity exists in the Company's plant to produce 16,000

units of the toy each month. Variable costs to manufacture and sell one unit would be P1.25, and fixed costs associated with the toy would total

P35,000 per month.

The Company's Marketing Department predicts that the demand for the new toy will exceed 16,000 units that the company is able to produce.

Additional manufacturing space can be rented from another company at a fixed cost of P1,000 per month. Variable costs in the rented facility would total P1.40 per unit, due to somewhat less efficient operations than in the main plant.

Required:

a) Compute the monthly breakeven point for the new toy in units and in total sales in pesos. Show computations in good form.

b) How many units must be sold each month to make a monthly profit of P12,000?

c) If the sales manager receives a bonus of 10 cents for each unit sold more than the breakeven point, how many units must be sold each month to

earn a return of 25% on the monthly investment in fixed costs?

2. The contribution margin of the Man's Store for the month of November 2019 is shown below:

Man's Store

Contribution Margin Income Statement

November 2019

Sales Revenue P60,000

Variable Expenses:

Cost of goods sold P22,000

Selling 13,000

Gen. and Administrative 7,000 42,000

Contribution margin P18,000

Fixed Expenses:

Selling P11,000

Gen. and Administrative 3,000 14,000

Operating income P4,000

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The company sells two of ties for every belt. The ties sell for P7, with a variable expense of P4.90 per unit. The belts sell for P6, with a variable unit cost of P4.20.

Required:

1. Determine the Man's Store monthly breakeven point in the number of ties and belts. Prove the correctness of your computation by preparing a summary contribution margin income statement at breakeven. Show only two categories of expenses: variable and fixed

2. Compute for the margin of safety in pesos.

3. Suppose that the company increases monthly sales by 15% above the P60,000. Compute for the operating income.

4. Suppose the company expand the store and increases monthly fixed expenses by P4,800. Use the contribution margin approach to determine the new breakeven sales in pesos.