Problem 1 Jack Tours takes tourists on helicopter tours of Cebu. Each tourist buys a P15,000 ticket; the variable costs average P6,000 per person. Jack Tours has annual fixed costs of P70,200,000. Reguired: A. How many tours must the company conduct in a month to break even? (5 points) B. Compute the sales revenue needed to produce a target net profit of P3,600,000 per month. (5 points) C. Calculate the contribution margin ratio. (5 points} D. Determine whether the actions that follow will increase, decrease, or not affect the company's break-even point. a. A decrease in tour prices. (2 points) b. The termination of a salaried clerk (no replacement is planned). (2 points) c. A decrease in the number oftours sold. (2 points) Problem 2 Papizza Company delivers pizzas to dormitories and apartments near Cebu's University belt. The company's annual fixed costs are P4,800,000. The sales price averages P900, and it costs the company P300 to make and deliver each pizza. Reguired: A. How many pizzas must Papizza sell to break even? (5 points) B. How many pizzas must the company sell to earn a target net profit of P5,400,000? (5 points) C. If budgeted sales total 9,900 pizzas, how much is the company's safety margin? (5 points) D Papizza's assistant manager, a Carolinian CPA, has suggested that the firm should try to increase the contribution margin per pizza. Explain the meaning of "contribution margin" in layman's terms. (5 points) Problem 3 Below are income statements that apply to three companies: Titas, Vicks, and Jolina: Titas Co. Vicks Co. Jolina C0. Sales P100 P100 P100 Variable costs ) ) 4%) Contribution margin P 90 P 80 P 70 Fixed costs (30) (20) [10) Profit before taxes P 60 P 60 P 60 Reguired: A. Within the relevant range, if sales go up by P1 for each firm, which firm will experience the greatest increase in profit? {5 points) B. Within the relevant range, if sales go up by one unit for each firm, which firm will experience the greatest increase in net income? (5 points) C. At sales of P100, which firm has the highest margin of safety? (5 points) Problem 4 The Kunts Company sells two products, Aleph and Beth, with contribution margin ratios of 40 and 30 percent and selling prices of P5 and P250 a unit. Fixed costs amount to P72,000 a month. Monthly sales average 30,000 units of product Aleph and 40,000 units of product Beth. Reguired: A. Assuming that three units of product Aleph are sold for every four units of product Beth, calculate the peso sales volume necessary to break even. (5 points) B. As part of its cost accounting routine, Kunts Company assigns P35,000 in fixed costs to each product each month. Calculate the break-even peso sales volume for each product. (5 points) C. Kunts Company is considering spending an additional P9,700 a month on advertising. giving more emphasis to product Aleph and less emphasis to product Beth. If its analysis is correct, sales of product Aleph will increase to 40,000 units a month, but sales of product Beth will fall to 32,000 units a month. Recalculate the breakeven sales volume, in dollars, at this new product mix. Should the proposal to spend the additional P9,700 a month be accepted? (10 points) Problem 5 Oakwards, Inc. recently sold 70,000 units, generating sales revenue of P4,900,000. The company's variable cost per unit and total fixed cost amounted to P20 and P2,800,000, respectively. Management is in the process of studying the peso impact of various transactions and events, and desires answers to the following independent cases: Reguired: Case no. 1: Management wants to lower the firm's break-even point to 52,000 units. All other things being equal, what must happen to fixed costs to achieve this objective? {7 points) Case no. 2: The company anticipates a P2 hike in the variable cost per unit. All other things being equal, if management desires to keep the firm's current break-even point, what must happen to Oakmark's selling price? If selling price remains constant, what must happen to the firm's total fixed costs? (7 points) ANSWERS HERE (always show solutions, handwritten answers are also accepted)