PLEASE PROVIDE SOLUTION

Problem #3: Following are data taken from the most recent income statement of Whitney Company: P450,000 P90,000 78,300 98, 500 P266,800 P183,200 Sales (45,000 units at P10 per unit) Less cost of goods sold: Direct materials Direct Labor Manufacturing overhead Gross margin Less operating expenses: Selling expenses Variable: Sales commissions Shipping Fixed (advertising, salaries) P27,000 5,400 32.400 120,000 152,400 Administrative: Variable (billing and other) Fixed (salaries and other) Net operating loss 1,800 48,000 49,800 P(19,000) All variable expenses in the company vary in terms of units sold, except for sales commissions which are based on pesos sales. Variable manufacturing overhead is P0.30 per unit. There was no beginning or ending inventories. Whitney Company's plant has a capacity of 75,000 units per year. The company has been at a loss for several years. Management is studying several possible courses of action to determine what should be done to make next year profitable. REQUIRED: A. The president is considering two proposals prepared by his staff: a. for next year, the vice president would like to reduce the unit selling price 20%. She is certain that this would fill the plant to capacity. b. for next year, the sales manager would like to reduce the unit selling price by 20%, increase the sales commission to 9% of sales, and increase advertising by P100,000. Based on marketing studies, he is confident this would increase sales by one-third. Compute the amounts of income, one under the vice president's proposal and the other one under the sales manager's proposal. B. Refer to the original data. The president believes it would be a mistake to change the unit selling price. Instead, he wants to use less costly raw materials, thereby reducing unit costs by P0.70. How many units would have to be sold next year to earn a target profit of P 30,200? C. Refer to the original data. The company has been approached by an overseas distributor who wants to purchase 9,500 units on a special price basis. There would be no sales commission on these units. However, shipping cost would be increased by 50% and variable administrative cost would be reduced by 25%. In addition, a P5,700 special insurance fee would have to be paid by Whitney Company to protect the goods in transit. What unit price would have to be quoted on the 9,500 units by Whitney Company to allow the company to earn a profit of P14,250 total operations? Regular business would not be affected by this special order