AC1103 (ManSci )

1. Green Corporation expects to sell 3,000 plants a month. Its operations manager
estimated the following monthly cost:
Variable Costs P 7,500
Fixed Costs 15,000
What sales price per plant does she need to achieve to begin making a profit if she
sells the estimated number of plants per month?

Contribution Margin = Fixed cost

= P 15,000

(Contribution Margin÷Unit Sales)+Variable cost per unit= Desired Minimum

Sales Price

(P 15,000÷3,000)+(P 7,500÷3,000) P 7.50

2. An organization’s break-even point is 4,000 units at a sales price of P50 per unit,
variable cost of P30 per unit, and total fixed cost of P80,000. If the company sells
500 additional units, by how much will its profit increase?

Unit contribution margin (P50-P30) P 20.00

Additional Profit (500×P20) P 10,000.00

After the break-even level, the amount of profit equals the unit contribution
margin multiplied by the number of units sold in excess or break-even units.
The candidate should remember that the profit increases by the amount of
contribution margin brought by additional units sold.

or

Sales: (4,500×P50) P 225,000

Variable Cost: (4,500×P30) (135,000)
Gross Profit 90,000
Fixed Cost (80,000)
Net Income P 10,000

3. The Red Lions Brotherhood is planning its annual Riverboat Extravaganza. The
Extravaganza committee has assembled the following expected costs for the
event:
Dinner per person P 70
 Programs and souvenir per person 30
Orchestra 15, 000
Tickets and advertising 7,000
Riverboat rental 48,000
Floor show and strolling entertainment 10,000
The committee members would like to charge P300 per person for the evening’s
activities. Assume that only 250 persons are expected to attend the extravaganza,
what ticket price must be charged to breakeven?

Cost of dinner P 70.00

Favors and program 30.00
Fixed costs
(15,000+7000+48,000+10000)÷250 320.00
Cost to be charged P 420.00

4. At a break-even point of 5,000 units sold, variable expenses were P10,000 and
fixed expenses were P50,000. The profit from the 5,001st unit would be?

The amount of contribution per unit is constant a relevant range. The amount of
profit is increased by the amount of unit contribution margin.

Contribution Margin per unit:

Fixed Cost ÷Break Even unit sales
P50,000÷5,000 = P10.00

5. Seal Yard Ornaments sells lawn ornaments for P15 each. Seal’s contribution
margin ratio is 40%. Fixed costs are P32,000. Should fixed costs increase 30%, how
many additional units will Seal have to produce and sell in order to generate the
same net profit as under the current conditions?

Current break-even
pesos: (P32,000÷0.40) P 80,000
Units (P32000÷P6) 5.333
Contribution margin per unit: P15×0.40 6.000

Additional units to cover additional fixed cost

(P32,000×0.3)÷P6 1.600

Alternative solution:
New breakeven units (P32,000×13)÷P6 6.933
Less current break-even units 5.333
increase in break-even units 1.600