Problem A

1 BEP = FC/CMR Ratio

Selling Price per unit 25.00 100%
Less: Variable cost per unit 15.00 60.00%
Contribution Margin per unit 10.00 40.00%

Fixed Cost 100,000.00

Divided by CMR 40.00%
Break Event Point in Peso 250,000.00

BEP in units
Fixed Cost 100,000.0
Divided by CM/unit 10.00
Break Event Point in Units 10,000 units
Ratio
2 Selling Price per unit 25.00 100%
Less: Variable cost per unit 15.00 60.00%
Contribution Margin per unit 10.00 40.00%

3 Net Profit before tax 20,000.00 Net Profit before tax

Fixed Cost 100,000.00 Fixed Cost
Contribution Margin 120,000.00 Contribution Margin
Divided by CMR 40.00% Divided by CMR
Target Sales 300,000 Target Sales

4 Net Profit after tax 21,000.00 Net Profit after tax

Divided by 1-TR 70% Divided by 1-TR
Net Profit before tax 30,000.00 Net Profit before tax
Fixed Cost 100,000.00 Fixed Cost
Contribution Margin 130,000.00 Contribution Margin
Divided by CMR 40.00% Divided by CMR
Target Sales 325,000.00 Target Sales

5 Required Sales = FC/CMR-PR

Fixed Cost 100,000

Divided by (40%% - 8%) 32%
Required Sales 312,500

6 Required Sales in units = FC/CM/u-P/u

Fixed Cost 100,000

Divided by (10.00 - 2.00) 8.00
Required Sales 12,500 units

In units In Peso
7 Average monthly sales 11,000 275,000
 Less: Break-even point in units 10,000 250,000
Margin of safety 1,000 25,000

8 MSR = MS/S
Margin of safety 25,000
Divided by Average monthly sales 275,000
Margin of safety ratio 9%

BESR = BES/S In units In Peso

Break-even point 10,000 275,000
Divided by Average monthly sales 11,000 250,000
Break-even sales ratio 91% 110%

9 Operating leverage factor 0r Degree of Operating Leverage = CM/Profit before tax

Sales (11000 x P25) 275,000.00

Less: Variable Cost (11000 x P15) 165,000.00
Contribution Margin 110,000.00
Less: Fixed cost 100,000.00
Net income before tax 10,000.00
Less: Income tax 3,000.00
Net income after tax 7,000.00

Contribution Margin 110,000.00

Divided by Net income before tax 10,000.00
Degree of operating leverage 11.00

10 Fixed Cost 120,000.00

Divided by CM/u 10.00
Break-even point in units 12,000
Less: BEP in units based on FC of P100000 10,000
BEP in units increased by 2,000

In Ratio
11 Selling price per unit 25 100%
VC per unit (increase to) 20 80%
CM per unit 5 20%

Fixed cost 100,000.00 100,000.00

Divided by CMR 20% 5
Break-even point in Peso 500,000.00 20,000.00

12 Selling price per unit (increase to) 30

VC per unit 15
CM per unit 15

Fixed cost 100,000.00

Divided by CM/unit 15.00
Break-even point in Peso 6,667
Less: BEP in units based on FC of P100000 10000
Decrease by (3,333)
 20,000.00
100,000.00
120,000.00
10.00
12,000 units

21,000.00
70%
30,000.00
100,000.00
130,000.00
10.00
13,000.00 units
13 Direct Material, beg 52,000.00
Add: Net Purchases
Purchases - Direct Materials 145,000.00
Add: Freight in 5,650.00
Less: Purchase returns and allowances (2,685.00)
Total 147,965.00
Total Material available 199,965.00
Less: Direct Material, end 44,000.00
Direct material used 155,965.00
Direct Labor 183,470.00
Prime Cost 339,435.00

14 Direct Labor 183,470.00

Factory overhead (P183,470 x 80%) 146,776.00
Conversion Cost 330,246.00

Direct material used 155,965.00

Direct Labor 183,470.00
Factory overhead (P183,470 x 80%) 146,776.00
15 Manufacturing Costs 486,211.00
Add: Work in Process, beg 110,000.00
Total Goods put into process 596,211.00
Less: Work in Process, end 135,000.00
Total Goods manufactured 461,211.00
Add: Finished Goods, beg 68,000.00
16 Total Goods Available for Sale 529,211.00
Less: Finished Goods, end 56,000.00
18 Factory overhead over-applied (21,776.00)
17 Cost of Goods Sold 563,435.00

19 Decrease by (21,776.00)
20 Sales Salaries - Fixed Cost
Commission - Variable Cost
Shipping Cost - Mixed Cost
Advertising - Discretionary cost

21 Variable Cost per unit = P38,000 - P32,400 / 35,000 - 28,000

0.8
February
Total Cost 38000
Less: Variable Cost (35000 units x P.8) 28000
Fixed Cost 10000

March
Total Cost 32400
Less: Variable Cost (28000 units x P.8) 22400
Fixed Cost 10000

Cost function = Total Cost = P10,000 + .80x

22 Salaries 51000
Commission (40,000 units x P10 x 5%) 20000
Shipping costs (40000 units x .P80 + P10,000) 42000
Total Cost in May 113000
 23 Profit is P450,000.
Selling Price per unit 60
Less: Variable costs per unit
Prime cost 20
Factory overhead 5
Selling expenses 3 28
Contribution Margin per unit 32
Multiply by Sales unit 50,000
Total Contribution Margin 1,600,000
Less: Fixed Costs 1,150,000
Net Profit 450,000

24 P63.75 per unit

Fixed Cost 1,150,000
Variable Cost (50000 units x PP28) 1,400,000

Sales = VC + FC + Profit
50000 x = 1,400,000 + 1,150,000 + (20% x 50000X)
50000x - 10000x = 1,400,000 +1,150,000
40000x = 2,550,000
x = 63.75 per unit

25 57,500 units
Required sales in units to Fixed Cost
earned a desired profit ratio CM/u - Profit/u

**Profit per unit (20% x P60) 12

1,150,000
32 - 12

57500 units
Variable Costing
26 P46.50 per spc/u
Materials (P25,200/1,120 units) 22.50
Labor (P18,480/1,120 units) 16.50
Variable Factory Overhead (P8,400/1,120 units) 7.50
STANDARD PRODUCT COST PER UNIT 46.50

27 Materials Labor Variable FOH

Actual Costs 23400 17160 7800
Standard (Actual Production x Std cost per unit 23400 17160 7800
Variances 0 0 0

28 Sales (1,000 units x P130) 130000

Variable Cost
Product Cost (1000 units x P46.50) 46500
Variable selling expense 15000
Variable administrative expense 3750
Total Variable Cost 65250
Contribution Margin 64750
Less: Fixed Costs
Fixed Factory Overhead 10000
Fixed selling expense 14700
Fixed administrative expense 6375
Total Fixed Costs 31075
Operating income or Net income 33675

29 Ending inventory in units 320

Multiply by Std cost per unit 46.50
Ending inventory 14880

30 Fixed factory overhead (actual incurred) 10000

Fixed selling expense 14700
Selling expense 6375
Total Fixed Costs 31075

31 Sales (1,000 units x P130) 130000

Variable Cost
Product Cost (1000 units x P46.50) 46500
Actual Manufacturing Contribution Margin 83500

32 Sales (1,000 units x P130) 130000

 Variable Cost
Product Cost (1000 units x P46.50) 46500
Variable selling expense 15000
Variable administrative expense 3750
Total Variable Cost 65250
Contribution Margin 64750

33 Variable Cost
Product Cost (1000 units x P46.50) 46500
Variable selling expense 15000
Variable administrative expense 3750
Total Variable Cost 65250

Absorption Costing
34 P46.50 per spc/u
Materials (P25,200/1,120 units) 22.50
Labor (P18,480/1,120 units) 16.50
Variable Factory Overhead (P8,400/1,120 units) 7.50
Fixed Factory Overhead (P10,640/1,120 units) 9.50
STANDARD PRODUCT COST PER UNIT 56.00

Materials Labor Variable FOH

Fixed FOH
35 Actual Costs 23400 17160 7800 ###
Standard (Actual Production x Std cost per unit 23400 17160 7800 ###
Variances 0 0 0 120

36 Sales (1,000 units x P130) 130000

Cost of Goods Sold
Product Cost (1000 units x P56) 56000
Add: Unfavorable fixed overhead variance 120
Total Cost of Goods Sold 56120
Gross Profit 73880
Operating Expense
Fixed selling expense 14700
Fixed administrative expense 6375
Variable selling expense 15000
Variable administrative expense 3750
Total operating expense 39825
Operating income or Net income 34055

37 Ending inventory in units 320

Multiply by Std cost per unit 56.00
 Ending inventory 17920

38 Fixed factory overhead (1000 units x P9.50) 9500

FOH variance (unfavorable) 120
Fixed selling expense 14700
Selling expense 6375
Total Fixed Costs 30695

39 0

40 0
41 Variable Cost
Product Cost (1000 units x P46.50) 46500
Variable selling expense 15000
Variable administrative expense 3750
Total Variable Cost 65250

42 Net income absorption costing 34055

Add: Fixed FOH, beg (280 x P9.50) 2660
Less: Fixed FOH, end (320 x P9.50) 3040 380
Net income variable costing 33675
 Product A Product B
2014 2015 2014 2015
Units Sold 10000 12000 8000 10000
Unit Selling Price 15 18 22 28.6
Unit Cost 8.000 9 15 13.5

A. Product A: 12,000 units/1.20 10000

Product B: 8,000 units x 1.25 10000
B. Product A: P15 x 1.20 18
Product B: P22 x 1.30 28.6
C. Product A: P9/1.1250 8.000
Product B: P15 x .90 13.5
Year 2014

Gross Profit, 2014 126000 Sales

Gross Profit, 2015 259000 Cost of Sales
Change in peso 133000 43 Gross Profit

Sales Price Factor Year 2015

Sales this year 502,000
Sales this year at last year Price Sales
12,000 units x P15 180,000 Cost of Sales
10,000 units x P22 220,000 400,000 Gross Profit
Increase in Gross Profit (Favorable) 102,000 44

Cost Factor
Cost of Sales this year 243,000
Cost of Sales this year at last year Cost
12,000 units x P8 96,000
10,000 units x P15 150,000 246,000
Decrease in Gross Profit (Unfavorable) 3,000 45

Quantity Factor
Increase in total quantity 4,000
Multiply by Average Gross profit per unit last year 7.00
Increase in Gross Profit 28,000.00 46

Salex Mix Factor

Average gross profit per unit this year at last year price 7.00
Less: Average Gross Profit per unit last year 7.00
Increase -
Multiply by: Total quatity sold this year 22,000
Increase in Gross Profit - 47

Total increase in Gross Profit, 2015 133,000.00

 Product A Product B Total
150000 176000 326000
80000 120000 200000
70000 56000 126000

Product A Product B Total

216000 286000 502000
108000 135000 243000
108000 151000 259000

Average gross profit per unit this year at last year price
Sales this year at last year Price 400000
Cost of Sales this year at last year Cost 246000
Gross Profit this year at last year Price 154000

Average =128500/22000 7.00

Average Gross Profit per unit last year

Sales 326000
Cost of Sales 200000
Gross Profit 126000
Average = 104750/18000 7.00
 49 Sales Price Factor
Sales this year 225,500.00
Sales this year at last year Price (190,000 x 85%) 161,500.00
Increase in Gross Profit (Favorable) 64,000.00

50 Cost Factor
Cost of Sales this year 188,900.00
Cost of Sales this year at last year Cost 168,160.00
Increase in Gross Profit (Favorable) (20,740.00)

48 Quantity Factor
Sales this year at last year Price (190,000 x 85%) 161,500.00
Sales last year 190,000.00
Decrease in Sales (28,500.00)
Multiply by GPR last year 23.37%
Decrease in Gross Profit (6,660.00)

Total Increas in Gross Profit, 2015 36,600.00

14,760.00

2014 2015 Change in Peso Change in %

Net Sales 190,000 225,500 35,500 18.68%
Cost of Sales 145,600 188,900 43,300 29.74%
Gross Profit 44,400 36,600 (7,800) -17.57%

GPR 23.37% 16.23%

CR 76.63% 83.77%
Year 2014
54. 30,888 weighted average of ordinary shares
1-Jan-14 25593 1.08 27640 12/12 27640
1-May-14 4500 1.08 4860 8/12 3240
31-Dec-14 32500 30880

55. P19.95 BEPS

Net income 632400
Less: Preference dividends (P135,000 x 12%) 16200
Net income after preference dividends 616200
Divided by weighte average common stock 30880
Basic Earnings per share, 2014 19.95

56. Earnings per share are anti diluted because are still no convertible securities that might increase the number of ordinar

Year 2015 Weighted Average

1-Jan-15 32500 2 is to 1 65000 12/12 65000
31-Jan-15 1100 2 is to 1 2200 11/12 2017
1-Sep-15 -500 -500 4/12 -167
1-Nov-15 500 500 2/12 83
67200 66933

Net income 438,080

Less: Preference Dividends 19,800
Net income after dividends 418,280
Weighted average common shares 66,933
Basic earnings per share, 2015 6.25 57

Option shares are diluted if average exercise price is higher than option price
Option shares 20000
Assumed shares (20,000 shares x P30/P40) 15000
Incremental EPS 5000 1

Convertible Bonds payable

Interest expense, net of tax (P2,500,000 x 10% x 1-TR) 175000
Divided by incremental shares (2500 bonds x 40 shares) 100000
Incremental EPS 1.75 2

Convertible preference shares

Preference Dividends (P165,000 x 12%) 19800
Divided by incremental shares (1,650 shares x 2 shares) 3300
Incremental EPS 6 3
 Net income Common Shares EPS
Basic EPS 438,080 67,200 6.52
Options - 5,000
Diluted EPS 438,080 72,200 6.07
Convertible bonds 175,000 100,000
Diluted EPS 613,080 172,200 3.56 58
Convertible Preference 19,800 3,300
Diluted EPS 632,880 175,500 3.61
ase the number of ordinary shares

Retained Earnings, beg 792,920

Add: NET INCOME, 2015 438,080
Less: Preference Dividends 19,800
Cash dividends (ordinary), 67,200 shares x P4) 268,800
Less: Retained Earnings, end 942,400