Problem... Decision making

The 3 Company provides you with the following information on its products: Unit selling price P100 Unit variable costs and expenses 75 Fixed costs and expenses per year P600,000 It has been estimated that during a temporary shutdown 0 four months, xed costs and expenses can be reduced by 20%, although additional costs of maintenance and security of P18,000 has to be incurred. REQUERED: 1. At what point in units would loss from operations be equal to shutdown costs? Prove by preparing an income statement. 2. How many units must be sold to avoid a loss? Prove also the answer by preparing an income statement. 3. How much is the net advantage or disadvantage of shutting down during the 4 month period? 4. Assuming that the additional cost for security will not change at P18,000, compute again for shutdown point, if the shutdown would be: a Three months b. Six months 0. Five months CL One year Units Period Amount Total fixed overhead cost (P6.00/unit) 200,000 12 months. P1,200,000 (if company continues operating) 16,667 1 month. 100,000 50,000 3 months 300,000 Period Amount Total fixed overhead cost 3 months P148,000 (if company discontinues operating) + 28,000 P176,000 Reg. Shutdown point Total Contribution M = P300,000 - P176,000 P124,000 P42.00- P15.60-P4.20- P5.00- P1.20) P16.00 Reg. 2 The company is advised to continue operating for the next three(3) months because the projected sales is 10,000 units. It is greater than the shutdown point of 7,750 units. a net dvantage of P (P16.00 CM x 2,250 unit A comparative income statement is shown below to prove this amount. Continue Continue Continue Shutdown *7,750 units **10,000 units *#*6,000 units Zero sales Sales (P42) P325,500 420,000 P252,000 PXXX Variable cost & expenses(P26) 201,500 260,000 156,000 XXX Contribution margin P124,000 P160,000 P96,000 PXXX Fixed cost & expenses (3 mos.) 300,000 300,000 300,000 176,000 Net income P(176.000) P(140 000) P(204 000) P(176 000) *Shutdown point. P36 00 **Bigger than the shutdown point by 2,250 units. Net advantage of cont ***Smaller than the shutdown point by 1,750 units