The cost sheet of a company based on a budget volume of sales of 400,000 units per quarter is as below:

BWP Per Unit

Direct materials 6

Direct wages 3

Factory overheads (50% fixed) 8

Selling / Administration (1/3 variable) 4.5

Selling price 24

When the budget was discussed, it was felt that the company would be able to achieve only a volume of 300 000 units of production and sales per quarter. The company therefore decided that an aggressive sales promotion campaign should be launched to achieve the following improved operations:

Proposal I:

Sell 500 000 units per quarter by spending P250,000 on advertising.

The factory fixed will costs will increase by P40,000 per quarter.

Proposal II:

Sell 600,000 units per quarter subject to the following conditions: An overall price reduction of`P2 per unit is allowed on all sales. Variable selling and administration costs will increase by 6%. Direct material costs will be reduced by 1.5% due to purchase price discounts. The fixed factory costs will increase by P250 000 more.

Required:

Prepare a Flexible Budget at 300 000, 500 000 and 600 000 units of output per quarter and calculate the profit at each of these levels of output.