cost-Volwne-P_r oflt Analysis

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Chapter Sb

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MULTiPLE CHOICE PROBLEMS
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1. During October 2008, Adam

Company had sal~s of P5,000,000 variable ~ sts of
_!2,000,0~? and fixed costs amounting to P.,1500,000 fur produ~ M. Assume that
cost behav1o~r and unit selling price unchanged during November, 2008. In order. for
Adam to reahze operating ,income-o~ from product M- for November, sales
would have to be · _ . . ·
a. P3, 750,000 b. P4-,050,000 ® P4,50Q,OOO d. P4,soo;ooo

2. Wilson Comp'a nY,_. prepared the ·following prel~ary forecast con_ceming product G
for ~008 ~surning ~o. e~penditure for advertising: _ · · . / :1 f
Selling pn~ per umt i P. 10.00 I\S Variable costs P600,000
Unit sales I 100,QOO 1lb Fixed costs 300,,000
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Based on a market studt..!!L.J?ecember, 2007, Wilson estim.,..atecl!hat it could increase

the ·unit selling ~~ce '~Yi
l~ ~~ and incr~e th~-~-1u.!.~~les{by 1_(2% i.f.£1.Q?;O_O.Q were . ---
spent on advert1smg. m surrung that-WIison · mcorporates these changes m its 2008
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forecast, what should be ,the operat ing mcodte,from product' G?

a. Pl_75,000 . b:. ., Pl96;0oo··-r-:·· :-~-'. .c. P205,000 d. P365,000

3. Singer, Inc. sells product R, for PS per unit. The ·fixed costs amount to P2 I M Q9 and
the variable costs are 60% of_tbisefling ...pri~. What would oe the amount of sales if
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Singer is to re~lize,a profit of IQ% of sales?
a. p100,ooo b. rs2s·,ooo c. P472;5oo d. p420,ooo r
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4. Lindsay Cotpqration reported the following results from sales of 5,000 units of
product A for ·tlte month of September 2008 : · ~f .· .
Sales I ~.000 Fixed costs P60,000 "· ~ li .

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Variable costs . Operating income 20,000 2o >:,
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Assume _that Lindsay .increases the selling pnce of produc~ A by ( l Do/o on ?ctober I,
2008. How many units of product _t,.. ~_µId have to be sold m Octobef 2008 m order to
generate an operating income of f 20;000?) · _ - ·
--«'.' 4,000 . - b: 4,300 "---~ _/ C. 4,500 ·, 1 d. 5,000

5. Warfield ,Co~pany is planning to sell,100,000 units of Product T for Pl2 a unit. Th~
fixed costs ~ 10unts to P280,000. In order to realize·a profit of P200,00!)., what would
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be the variable costs?
a. P480,000 ..b( P720,000 c. P900,000 d. P920,000

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 'i I Cha~ Si,
Cool-V....__Pn&A-,,,. I
coot-'l.,._..Pro11t AmlJwb
- 5 • [Link] thfec-units-:or X for each Cloapm- Sis
6. Thomas Company sells produ~) {, Y,
unit o~ Z, and two UDits o('f each u;;: ZX
The contribution margins ;ire PLoo
unit of z. Fixed costs are P600,ooo.,..
per umt ofX, PI.50 per umt ofY, and · the break-even point?
13. Assuming that tbe total fixed COSts of Taylor increase by 30%, what amount of sales
pesos would be necessary to generate a net income of p9 QOO?
a. P204,000 b. P464,000 c. P659,000 . P680,000
How many units of]{. would ToomaS sell at 000 d. 400,000
360
a . 40,000 ..J(. 120,000 c. '
14. Tice Company is a [Link]:r of lamps_ During the year a new called
7 Anthooy Company bas .ected cost of goods sold of P4,000,000, including fi)(Cd
• costs of PS00,000. v~fu costs are expected to be 75% of net sales. What will be
"Horolin" was introduced. The break-even point for sales ofHorolin is P200,000 with
a contribution margin of 400/o. Assuming that the profit for the Horolin line during the
the projected net sales? d P6 400 . year amounted to PI 00,000, total sales during the year would have amounted ~o
;C P4,266,667 b. P4,800,000 c. P5,333,333 · , ,000
a. P300,000 b. P420,000 / P450,000 d. P475,000
8. Day Company is a medium-sized manufacturer of lamps. During 200~, a n~ line
called "Twilight" was made available to Day's custo~rs. 'fh<;,
break-eve~ point for 15. fuformation concerning A is as fo~ows:
sales of Twilight is P400,000 with a contribution margin of 40 ¼. · Assummg that the_ Sales P300,000-- VMiable costs 240,000 Fixed costs 40,000
operating profit for the Twilight line for 2008 amouirted 'to P200,000, total _~es for ' - - · - . . / ·2
2008 amounted to , Assuming that Label inc~-~es ~f~oduct A byi 2 ~ should be the net
a. P600,000 b. P840,000 .)1/. P900,~ ~- P950,000 income from Product A?
a. P20,000 b. P24,000 p. P32,000 d. P 80,000
9. The Insulatioo Corporation sells two products, Dee anJ
1Wee. Insulati~n ·sells these

products at a rate of 2 units of Dee to 3 units of Wee . .The contribution margin is P4 16. Dallas Company wishes to market ~ product for @:a unit. Fixed costs to
per unit for Dee and P2 per unit per unit for Wee. Insulation's fixed costs are . manufacture this product are ~ 00,00/ for less than 500,000 yajts and p~ for
P420,000. What woyld be the total units sold at the break-even point? 500,000 uruts or more. The ~ o n margin i!(200/o. How many [Link] must be sol~
a. 140,000 ,-tS: 150,000 c. 168,000 ' d. 180,000
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to realize net income from this productof PIOO,OOOT / '?-'>J/, 1 \

10. The Ship Company is planning to produce two products, Alt and Tude. Ship is a. 335,333 b. 500,000 c. 666,667 .,ir. ~~3,333 ,"\{/ ...
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planning to sell 100,000 units of Ah at P4 a unit and 200,000 units of Tude at P3 a
unit. Variable costs are 70% of sales for Alt and 80% of sales· for Tude. In brder to 17. Jarvis Company bas fixed cost of P200,000. It bas two products that it can sell, Tetra
r ~ a total profit of Pl60,000, total fixed costs would be and Min. Jarvis sells these products at the rate of two units of Tetra to one unit of
/f·PIS0,000 b. P90,000 c. P420,000 d. i P600,000 Min. The contribution margin is Pl per unit of Tetra and P2 per unit of Min. · How
many units of Min would be sold at break-even point?
11 . The Seahawk Company is_planning to sell 200,000 units of Produ~ B . The fixed costs a. 44,444 J>: 50,000 c. ~8,888 _<!: 100,000
.are P400,000 and the ~ l e ~ are 60% of the selling price. In order to realize a
profit of PI 00,000, the selling pnce per- uriit would nave t be 1. 18. The Oliver. Company plans to market a new product. Based_ on ~ e t studies,
a. P3.75 b. P4.17 C. [Link]; o i JI. P6.25 ·· Oliver estimates that it can sell 5,500 units in 2008. The selling- pnce WJII be P2.00
per unit. Variable costs are estimated to be 40% of the selling price. Fixed costs are
Items 12 and 13 are based on the following information:
estimated to be P6,000. What is the break-even point? . , _
, Taylor, Inc. produces only two products Acdorn '¼ a. 3,750 units y 5,000units' c. 5,500 Wilts d. 7,500 unrts.
and 40% of the total sales pesos of Taylor /
sales pesos) are 60% for Acdom and
P 150,000. There are no other costs.
085
or
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. and \3e_lnom. Th~ account for 60 °
Variable costs (as a percentage of
0 ~ : Total fixed ', costs amount to
,9. The Breiden Company sells rodaks for P_§,.00 per unit. Variable costs~ P2.00 per
·. ·· • p37 500 How many rodaks must be sold to realw: a profit
urut. Fixed costs are , · _
before income iaxes of 15 % of sal«:5
7 11 029 units .K. ,12,097 units ·
12 'What is Taylor's break-even point in pesos? 9 ,74o unrts
a . 9,375 units b. c. '
. a. PIS0,000 b. P214,286 c. P300 000 ' '1'½'1·)...-
, P500,00, ,, '>"''
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 Chaptor&r cost·V<>!°ie-Proftl Analy,,b
• Chapter Sb
f'ost-~olUIIK'--Pronr Analysb
25 In planning its operations for 2008 based on a sales forecast of P6,000,000, Wallace,
Items 20, 21. and 22 arc based on the following_information: · Inc. prepared the following estimated da~:
Cost and Expenses Variable
FULL TON COMPANY Fixed
Materials P l600Qoo
Fjnancial Prbjcct for Product USA . , '
For the Ycar Ended December 31. 2008 Labor 1,400,000 .
Overhead 600,000 P 900,000

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PI 0.000 Selling Exp. 240,000 360,000
Sales ( I00 units at Administrative Expenses 60,000 140 000
Manufacturing Costs:-- p 1.500' Total P3;900,000 Pl,400,000
Dircct L;ibor l.40(f

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Direct Materials l,O0IY WJiat would be the amount of sales pesos at the break-even point?
Variable Factor\' Overhead _w ' 4 400
Fixed Facton· Overhead . ~- P2,250,000 b. P3,500,000 P4,000,000 d. PS,300,000
Selling Expens~:
P 600 /, - 26. The following data pertains to Nova Company's cost-volume-profit relationships:
Variable
Fixed , 1,opo Break-even point in units 1,000 Variable costs per unit P 590
Administrative Expenses: Total Fixed costs PlS0,000
Variable · 500 .'
Fixed I 000 ___]_,_lQ_Q How much will be contributed to profit before income taxes by the I 00 I st unit sold?
Operating lnc~mc
., P 2,500 a. P650 b. P500 y. Pl50 d. None

20. How many units of product USA would have to be sold to break-even?.. ·. Jtems·27 and 28 are based on the following data:
y,: 50 b. 58 C. 68 d. 75
· The following iqforrnation pertains to !l,ica Company:
21 . What would thi operating income be if sales increased bv 25%?
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a. P3, 125 _g. P3,750 C. P4,0oo· d. PS,000 Sales (50,000 units) Pl,000,000 Materials and labor • P 300,000 r
Factory overhead: Selling and·General Expenses: ·
22. What would be the sales at the break-even point iffixed factory o~crhead increases by Variable 40,000 Variable 10,000 /
PJ ,700? .
Fixed 70,000 Fixed · 60,000 .,.
a. P6, 700 h., PS,400 C, P6,667 . d. P9,200
27. How much was Rica's break-even point in number of units?
23. At break-even point of.400 units sold, the variable Jests
were P400 and the fixed a. . 9,848 b. 18,571 / 10,000 d. 26,000
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costs were P200. What will the 401st unit sold contribute to profit before income '/?-
taxes? · ·
a. P0.00 J{ P0.50 28. What was Rica's contribution margin ratio? ' -1

c. [Link] a. 66% / 65% · C. 59% d. 35%

d. [Link]
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_ Oxford Company had sales am?unting to P3,000,000, variable costs amounting to 29. Klein Company sells on product for P80. The variable costs are Pl6 per unit. Fixed
p 1,soo,000 and fixed costs amounting to P800,ooo for product· Brum. What would . ,costs are P240,000. How mucli sales revenue will Klein _realize at the break-even
b,e the amount of sales pesos at the break-even point?
.J. P.z,000,000 b. P2,4oo,ooo c. P2,6oo,ooo d. PZ, 0,000 point'I /
a. . P3.750 b. P240,000 . P300.000 d. Pl ,200,000 "
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Chapt~rSi, coot-:V.,__Prollt Alllllyob

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C--V--Pn,tlt Alull,-b
Items 30 arid 31 are based on the following data pertaining to two· types of products 38:·U~rwood Company a contribution margin of 80%. Variable costs are P4 per

Company sell to have a P64,000 profit before taxes? f-gu, = /J{Jof-fr

• umt. At br«;ak-even point, sales are PS00,000. How many units will Underwood
manufactured by Korn Corporation: ·
Variable Costs Per Unit a. , 11 ,250 b. 24,000 c. 30,000 d. 36,250
Sales Price Per Unit P70 {: Cl
ProductY ' Pl20 200 -1"I) 37. Mosley C~pany sells one product for P90 per unit. Variable costs ~e P30. per unit.
Product z 500
' The marketing manager has proposed a new advertising campaign that would increase
Fixed costs total PJ00,000 annually. The expected mix in units is 60% for product y fixed costs by P360,000. How many additional units must Mosley sell to pay for the
· advertising campaign? . -
and 40% for product Z . ' ,
a. 3,000 · b . 4,000 6,000 d. 12,000
30. How much is Kom's break-even [Link] units?
a. 857 b. 1, 111 f-
2,000
d. 2,459 · 38. Martin Company sells two products - widgets and gmnos_ The company sells 3
widgets for every 2 gi2JllOS. Widgets sell for P50 and have variable costs of P30.
31. How much is Kom's break-even sales in pesos?
a. PJ00,000 b. P420,000 . c. P475,000 _fP544,000 Gizmos sell for P40 and have variable costs of P12. Fixed costs are Pl,450,000. How
many units of Widgets and Gizmos would the company·sell at break-even point?
. - Widgets Gizmos Widgets Gimlos
Items 32 and 35 are based on the following information: ' a. 25,000 37,500 c. 25,000 62,500
"ii: ·37,500 25,000 · d. 37,SOO 62,500
Michaels Company sells one ,product for Pl 00 per unit. Variable costs are P60 per unit.
Fixed costs are Pl50,000. Michaels results of op~ons for 2008 foll9w: · 39. -Brooks Company sells one product for PSO per unit. Variable costs are P20 per unit.
Income Statement ' Fixed costs are P839,000. Tax rate is 40%. How many units must Brooks Company
For the Year Ended December 31, 2008 sell to have a P780,000 profit after taxes?
Sales . P5oo,ooo a. - 26,000 b. S3,967 c. 6S,00~ · 9'( 71 ,300
Variable costs 300,000
Contribution Margin P200,000 40. Travis Company had S degrees of operating leve~ when its_profit before ~es was
Fixed costs 150,000 P200,000. If the company's sales increased by 101/o, what IS the company 5 profit
Profit before tax P 50,000 before taxes? .
·a. Pl00,000 b. P200,000 c. P300,000 d, P 4 00,000
32. What are the degrees of operating leverage for Michaels Company?
a. l ~- 3 4 d. 10

33. What is the margin of safety in sales revenue?

·y . Pl25,000 b. P200,000 c. 375,000
d . P500,000
34. What is the margin of safety in units?
,a: 1,250 b . 3,750 c. 3,000
d. 5,000
35. What is the margin of safety in percentage?
L 25% b. 33% · C. 40%
d. 133%

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