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PA Co. manufactures and sells roller skates, roller blades and skate boards. Roller skates are sold for P500, variable cost is P320 and the sales mix ratio is 10%. Roller blades are sold for P800, variable cost is P620 and the sales mix ratio is 40%. Skate boards are sold for P1,200, variable cost is P800 and the sales mix ratio is 50%. Total fixed cost is P480,000.

Required:

a. The management of PA Co. wants to achieve a profit of P1,000,000, what should be the total amount of sales? The amount of sales for each of the product?

b. At the level of sales in (a.) what is the margin of safety? Margin of safety percentage?

c. Compute the degree of operating leverage. d. If total sales increase by 60%, what is the net income?