Aklan Catholic College

Archbishop Gabriel M. Reyes St.

5600 Kalibo, Aklan, Philippines
Tel. Nos.: (036)268-4152; 268-9171
Fax No.: (036)268-4010
Website: http://www.acc.edu.ph
E-mail Add: [email protected]

MANAGEMENT SERVICES COST VOLUME PROFIT ANALYSIS

CONTIBUTION MARGIN

1. MXD Company has a sales of P2,000,000, variable costs of P700,000 and fixed costs of P500,000.
How much is the contribution margin?
a. P1,300,000 c. P1,500,000
b. P 800,000 d. P2,000,000

2. MXD Company has a sales of P2,000,000, variable costs of P700,000 and fixed costs of P500,000.
The company sold 1,000 units. How much is the contribution margin per unit?
a. P1,300 c. P1,500
b. P 800 d. P2,000

3. MXD Company has a unit sales price of P2,000, variable cost per unit of P700 and total fixed costs of
P390,000. How much is the contribution margin per unit?
a. P1,300 c. P2,000
b. P 390 d. P 700

4. MXD Company has a sales of P2,000,000, variable costs of P700,000 and fixed costs of P390,000.
How much is the contribution margin ration?
a. .35 c. .70
b. .65 d. .20

5. If the sales of the company amounted to P2,000,000 and the contribution margin ration is 30%, how
much should have been the contribution margin?
a. P 700,000 c. P2,600,000
b. P1,300,000 d. P1,400,000

BREAKEVEN POINT

6. If the income of the company is zero and the contribution margin is P300,000, how much should have
been the fixed costs?
a. P3,000,000 c. P150,000
b. P 300,000 d. zero

7. MXD Company has a unit sales price of P2,000, variable costs per unit of P700 and total fixed costs of
P390,000. How many units should be sold in order for the company to have zero profit?
a. 195 units c. 300 units
b. 557 units d. 495 units

8. MXD Company has a units sales price of P2,000, variable costs per unit of P700 and total fixed costs
of P390,000. How much should be the breakeven point in peso amount?
a. P390,000 c. P800,000
b. 253,500 d. P600,000

9. If the breakeven point is P4,000,000, the variable cost per unit is P300 and the contribution margin per
unit is P100, how much should have been the fixed cost?
a. P3,000,000 c. P2,000,000
b. P1,000,000 d. P4,000,000

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10. Selected budgeted data of ABC Company for the coming year are as follows:

Selling price per unit P 12.00

Budgeted sales 600,000
Fixed expenses 150,000
Variable cost per unit 8.00

What in the breakeven in sales in units?

a. 35,000 c. 40,000
b. 37,500 d. none of these

11. A company is concerned about its operating performance, as summarized below:

Revenue (P12.50 per unit) P300,000

Variable costs 180,000
Operating Loss (40,000)

How many additional units should have been sold in order for the company to breakeven?
a. 32,000 c. 16,000
b. 24,000 d. 8,000

12. A company manufactures a single product. Estimated cost data regarding this product and other
information for the product and the company are as follows:

Sales price per unit P40

Total variable production cost per unit P22
Sales commission (on sales) 5%
Fixed costs and expenses
Manufacturing overhead P5,598,720
General and administrative P3,732,480
Effective income tax rate 40%

The number of units the company must sell in the coming year in order to reach its breakeven point is:
a. 388,800 units c. 583,200 units
b. 518,400 units d. 972,000 units

Items 13 and 14 are based on the following information data pertaining to the types of products
manufactured by Korn Corporation:
Per Unit
Sales price Variable Costs
Product Y P120 P 70
Product Z 500 200

Fixed cost total P300,000 annually. The expected mix in units is 60% for Product Y and 40% for
Product Z.

13. How much is Korn’s breakeven sales in units?

a. 857 c. 2,000
b. 1,111 d. 2,459

14. How much is Korn’s breakeven sales in pesos?

a. P300,000 c. P475,000
b. P420,000 d. P544,000

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15. Maribel is selling three products, product Red, product White and product Blue. The company sells
three units of Red for every unit of Blue, and two units of White for every unit of Red. Fixed costs are
P720,000. Contribution margin are:

P1.70 per unit of Red

2.00 per unit of White
2.90 per unit of Blue

How many units White would the company sell at breakeven point?
a. 360,000 c. 72,000
b. 108,000 d. 216,000

DIFFERENT CVP RELATIONSHIPS

16. MXD Company has a unit sales price of P2,000, variable costs per unit of P700 and total fixed costs of
P390,000. How many units should be sold in order for the company to have P292,500 profit?
c. 525 units c. 300 units
d. 557 units d. 495 units

17. MXD Company has a units sales price of P2,000, variable costs per unit of P700 and total fixed costs
of P390,000. How much should be the sales in peso amount for the company to have a P292,500
profit?
c. P1,200,000 c. P800,000
d. P1,050,000 d. P950,000

18. MXD Company has a units sales price of P2,000, variable costs per unit of P700 and total fixed costs
of P390,000. How much should be the sales in peso amount for the company to have a P409,500 net
income after tax if the company is subject to 30% income tax?
a. P1,000,000 c. P1,350,000
b. P1,250,000 d. P1,500,000

19. Bulacan Gold, Inc. manufactures and sells key rings embossed with college names and slogans. Last
year, the key rings sold for P75 each, and the variable cost to manufacture them were P22.50 per unit.
The company needed to sell 20,000 key rings to break-even. The net income last year was P50,400.
The company expects the following for the coming year:

• The selling price of the key rings will be P90.

• Variable manufacturing costs per unit will increase by one-third.
• Fixed cost will increase by 10%.
• The income tax rate will remain unchanged.

For the company to break-even the coming year, the company should sell
a. 21,600 c. 21,250
b. 2.600 d. 19,250

20. A company has revenues of P500,000, variable costs of P300,000, and pretax profit of P150,000. If the
company increased the sales price per unit by 10%, reduced fixed cost by 20%, and let variable cost
per unit unchanged, what would be the new breakeven paoint in pesos?
a. P 88,000 c. P110,000
b. P100,000 d. P125,000

21. Mela Corporation has a contribution margin ratio of 0.26. It aims to have a net income of P320,000 with
a sales volume of P2 million. Its total fixed costs amount to
a. 200,000 c. 230,000
b. 83,200 d. 520,000

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22. Asian Corporation, a manufacturing company, is operating at 90% capacity. Since there is no other use
of the 10% idle capacity, an offer for a new order at P8.20 per unit requiring 15% capacity is being
considered. If the order will be accepted, the 5% additional capacity will be sub-contracted at the cost
of P7.80 per unit. The variable cost per unit of production of Asian Corporation follows:

Materials P 4.00
Labor 1.75
Variable overhead 1.75
Total P 7.50

What is expected contribution margin per unit on the new order?

a. P 0.40 c. P 0.50
b. P 0.60 d. P0.55

MARGIN OF SAFETY

23. MXD Company has a unit sales price of P4,000, variable costs of P700 and total fixed costs of
P330,000. How much is the margin of safety in pesos if the company’s actual sales amounted to
P1,600,000?
a. 0 c. 1,200,000
b. 2,000,000 d. 400,000

24. MXD Company has a unit sales price of P4,000, variable costs of P700 and total fixed costs of
P330,000. How much is the margin of safety in units if the company’s actual sales amounted to
P1,600,000?
a. 300 c. 400
b. 100 d. 500

25. MXD Company has a unit sales price of P4,000, variable costs of P700 and total fixed costs of
P330,000. How much is the margin of safety ratio if the company’s actual sales amounted to
P1,600,000?
a. 20.00% c. 25.00%
b. 18.75% d. answer not given

26. If the breakeven point is P70,000 and the margin of safety ratio is 30%, how much is the actual sales?
a. 100,000 c. 30,000
b. 70,000 d. 163,000

OPERATING LEVERAGE

27. The company has the following level of operations: sales – P100,000, variable costs – P40,000, fixed
costs – P20,000. How much should be the net income?
a. 60,000 c. 20,000
b. 80,000 d. 40,000

28. The company has the following level of operations: sales – P100,000, variable costs – P40,000, fixed
costs – P20,000. If there is a 10% increase in sales, how much should be the percentage change in
income?
a. 150% c. 25%
b. 15% d. 5%

29. The company has the following level of operations: sales – P100,000, variable costs – P40,000, fixed
costs – P20,000. How much is the degree of % change in income for every % change in sales?
a. 1.5 times c. 4 times
b. 3 times d. 4.5 times

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30. The company has the following level of operations: sales – P100,000, variable costs – P40,000, fixed
costs – P20,000. There is a subsequent 10% increase in sales. How much is the degree of operating
leverage?
a. 1.5 times c. 4 times
b. 3 times d. 4.5 times

31. The company has the following level of operations: sales – P100,000, variable costs – P40,000, fixed
costs – P20,000. There is a subsequent 20% increase in sales. How much is the degree of operating
leverage?
c. 1.5 times c. 4 times
d. 3 times d. 4.5 times

32. The company has the following level of operations: sales – P100,000, variable costs – P40,000, fixed
costs – P20,000. If the company wishes to increase DOL to 4, how much should be the increase in
fixed costs assuming contribution margin remains the same
a. 45,000 c. 65,000
b. 25,000 d. 20,000

COMPREHENSIVE ILLUSTRATION

USE THE FOLLOWING FOR THE NEXT ITEMS. The following as Addison Corporation’s contribution
format income statement for the last month:

Sales P1,000,000
Less: variable expenses 700,000
Contribution margin 300,000
Less: fixed expenses 180,000
Net Income P 120,000

The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last
month.

33. What is the company’s contribution margin ratio?

a. 250% c. 70%
b. 150% d. 30%

34. What is the company’s break-even point in units?

a. 20,000 units c. 18,000 units
b. 0 units d. 12,000 units

35. If sales increase by 100 units, by how much should net income increase?
a. P 400 c. P1,500
b. P4,800 d. P2,500

36. How many units would the company have to sell to attain target profits of P150,000?
a. 22,000 c. 25,000
b. 37,500 d. 26,667

37. What was the company’s margin of safety?

a. P400,000 c. P120,000
b. P600,000 d. P880,000

38. What is the company’s degree of operating leverage?

a. 0.12 c. 0.4
b. 2.5 d. 3.3

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