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Chapter 12 Exercise 1 21

The document contains an example income statement and four profitability exercises involving contribution format income statements, break-even analysis, and CVP graphing. The exercises calculate results of changes in sales volume, price, variable and fixed expenses, and determine break-even points and construct CVP graphs.

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freaann03
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385 views5 pages

Chapter 12 Exercise 1 21

The document contains an example income statement and four profitability exercises involving contribution format income statements, break-even analysis, and CVP graphing. The exercises calculate results of changes in sales volume, price, variable and fixed expenses, and determine break-even points and construct CVP graphs.

Uploaded by

freaann03
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Exercise 1 (Using a Contribution Format Income statement)

Nat Company’s most recent income statement is shown below:


Total Per Unit

Sales(30,000 units) P150,000 P 5.00


Less variables expenses 90,000 3.00
Contribution Margin 60,000 P2.00
Less fixed expenses 50,000
Net Operating income P 10,000

Required:

1. Sales Volume Increases by 15%


Total Per Unit

Sales (30,000 units × 1.15 =34,500 units) P172,500 P5.00


Less Variable Expenses 103,500 3.00
Contribution Margin 69,000 P2.00
Less Fixed Expenses 50,000
Net Operating Income P 19,000

2. Sales price decreases by 50 cents per unit, and the sales volume increase by 20%.

Sales (30,000 units × 1.20 = 36,000 units) P162,000 P4.50


Less Variable Expenses 108,000 3.00
Contribution Margin 54,000 P1.50
Less Fixed Expenses 50,000
Net Operating Income P 4,000

3. Selling price increases by 50 cents per unit, fixed expenses increases by P10,000 and the
sales volume decreases by 5%.

Sales (30,000 units × 0.95 = 28,500 units) P156,750 P5.50


Less Variable Expenses 85,500 3.00
Contribution Margin 71,250 P2.50
Less Fixed Expenses 60,000
Net Operating Income P 11,250

4. Variable expenses increases by 20 cents per unit, the selling price increases by 12%, and
the sales volume decreases by 10%.

Sales (30,000 units × 0.90 = 27,000 units) P151,200 P5.60


Less Variable Expenses 86,400 3.20
Contribution Margin 64,800 P2.40
Less Fixed Expenses 50,000
Net Operating Income P 14,800
Exercise 2 (Break-even Analysis and CVP Graphing)

Dinner (per person) P7


Favors and Program (per person) 3
Band 1,500
Tickets and Advertising 700
Riverboat Rental 4,800
Floorshow and Strolling Entertainers 1,000

The committee members would like to charge P30 per person for the evenings
activities.

1. Compute the break-even point for the Extravaganza ( in terms of the number of
persons that must attend).

The Contribution margin per person would be:

Price per ticket P30


Less Variable Expenses
Dinner P7
Favor and Program 3 10
Contribution Margin per person P20

Fixed Expenses:

Band P 1,500
Ticket and Advertising 700
Riverboat Rental 4,800
Floorshow and Strolling Containers 1,000
Fixed Expenses P 8,000

Break-even Fixed Expenses


Point = Contribution Margin per unit
(in unit sales)
P8,000
= P20 per person

= 400 persons

Or, at P30 per person, P12,000

2. Assume that only 250 persons attended the Extravaganza last year. If the same
number attends this year, what price per ticket must be charged to break even?

Variable cost per person (P7＋P3) P10


Fixed Cost per person (P8000÷250) 32
Ticket Price per person break even P42
3. Refer to the original data (P30 ticket price per person). Prepare a CVP graph for
the extravaganza from a zero level of activity up to 600 tickets sold. Number of
persons should be placed on the horizontal (X) axis, and pesos should be placed on
the vertical (Y) axis.

Persons Total Total Total Total Sales Profit(Loss)


Attending Estimated Fixed Cost Variable Values
Cost Cost
0 P8,000 P8,000 P0 P0 P(8,000)
100 9,000 8,000 1,000 3,000 (6,000)
200 10,000 8,000 2,000 6,000 (4,000)
300 11,000 8,000 3,000 9,000 (2,000)
400 12,000 8,000 4,000 12,000 0
500 13,000 8,000 5.000 15,000 2,000
600 14,000 8,000 6,000 18,000 4,000

Total Estimated Cost


Fixed Cost ＋ Total Variable Cost

Total Sales value


Persons Attending × Ticket Price per person (P30)

Total Variable Cost


Persona attending × Variable Cost per person (P10)

Profit(Loss)
Sales Value - Total Estimated

Loss BEP

Profit
Cost

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