UNIT EXERCISES

PROBLEMS

1. In the month of March, Andrews Touch Spa serviced 450 clients at an average price of P250. During the month fixed cost was P50,000 and variable cost were 40% of sales.

Required:

1. Determine the contribution margin in peso, per unit and in percentage.
2. Using the contribution margin technique, compute the breakeven point in pesos and in units.
3. Calculate the margin of safety and the margin of safety percentage.
4. Compute the degree of operating leverage.
5. If the sales increased by 50%, what is the amount of net income?
6. If the company desires to have a net profit of P50,000, what should be the amount of sales.

2. The accountant of Drew Motorist Inn is trying to determine the breakeven point. The inn has 20 rooms that it rents for P400 per night. Operating costs are shown below:

Salaries P 6,000 per month

Utilities 2,200 per month

Depreciation 1,300 per month

Maintenance 1,000 per month

Direct cost of service 120 per room

Other cost 30 per room

Required:

1. Determine the contribution margin per unit and in percentage.
2. Compute the breakeven point in pesos and in number of rooms rented per month.
3. If the company desires to have a net profit of P15,000, what should be the amount of sales.
4. In relation to (c), prepare a CVP income statement.
5. Compute the margin of safety and the margin of safety percentage.
6. Compute the degree of operating leverage.
7. If the net income decrease to P7,500, what is the % change in the sales.