Problem 1.

Assume that the company do have the following information:

Unit sales price ₱ 500.00
Unit variable costs ₱ 200.00
Total fixed costs ₱ 900,000.00
Interest expense 5% of sales
Tax rate 25%

Requirement: Compute the required sales in pesos and units for each of the following
independent scenarios:
1. Breakeven point (2 points)
2. Margin of safety rate of 25% (2 points)
3. Operating income of P300,000. (2 points)
4. Operating income is 40% of Contribution margin ratio (2 points)
5. Operating income is P180/unit (2 points)
6. Net income before tax is 25% of sales (3 points)
7. Net income after tax is 28% of sales (3 points)
8. Net income before tax is 6x interest expense (3 points)

HINT:
Sales XXXX
Less: Variable Cost XXXX
Contribution Margin XXXX
Less: Fixed Cost XXXX
Operating Income XXXX
Less: Interest Expense XXXX
Net Income before tax XXXX
Less: Income Taxes XXXX
Net Income XXXX

Problem 2. Short but very HMMMMM Company's income statement is shown below:
Total Per Unit
Sales (30,000 units) ₱ 150,000.00 ₱ 5.00
Less: Variable costs ₱ 90,000.00 ₱ 3.00
Contribution margin ₱ 60,000.00 ₱ 2.00
Less: Fixed costs ₱ 50,000.00
Operating Income ₱ 10,000.00

Requirement: Compute for the adjusted operating income and breakeven point in pesos for
each independent sensitity analysis:
9. Units sales price increases by 15% (2 points)
10. Unit variable costs decrease by 25% (2 points)
11. Total fixed costs increase to P80,000 (2 points)
12. Unit variable costs increased to 110%, the selling price increased to 120% (2 points).
13. The selling price increases by P0.50 per unit, fixed costs increase by P10,000, and the sales
volume decreases to 90% (2 points)

Problem 3. Will Survive 2nd Year Company sells two products, BBM Lolipops and Lenlen
Cotton Candies. The sales and contribution margin ratio of these two products are given
below:
BBM Cherry Lolipops Lenlen Cotton Candies
Sales ₱ 700,000.00 ₱ 300,000.00
Contribution margin ratio 60% 70%

The company’s fixed costs and expenses total P756,000. The company’s average unit sales
price is P60.

Requirement:
14. Average contribution margin ratio (1 point)
15. Composite breakeven sales in pesos (1 point)
16. Sales of BBM Cherry Lolipops and Lenlen Cotton Candies at breakeven point (2 points)
17. Net income for each of the two products, BBM Cherry Lolipops and Lenlen Cotton Candies,
assuming combined sales is P1,500,000. (2 points)
Problem 1. Assume that the company do have the following information:
Unit sales price ₱ 500.00 1
Unit variable costs ₱ 200.00
Total fixed costs ₱ 900,000.00
Interest expense 5% of sales
Tax rate 25%

Requirement: Compute the required sales in pesos and units for

each of the following independent scenarios: 2
1. Breakeven point (2 points)
2. Margin of safety rate of 25% (2 points) 3
3. Operating income of P300,000. (2 points)
4. Operating income is 40% of Contribution margin ratio (2 points) 4
5. Operating income is P180/unit (2 points)
6. Net income before tax is 25% of sales (3 points) 5
7. Net income after tax is 28% of sales (3 points)
8. Net income before tax is 6x interest expense (3 points) 6

Requirement # 4
Sales (Units) 5,000.00 7500
Sales (Pesos) XXXX 2,500,000.00 100 3,750,000.00
Less: Variable Cost XXXX 1,000,000.00
Contribution Margin XXXX 1,500,000.00 60
Less: Fixed Cost XXXX 900000 36
Operating Income XXXX 600,000.00 24
Less: Interest Expense XXXX
Net Income before tax XXXX
Less: Income Taxes XXXX
Net Income XXXX
Answer Key 100 Sales
Pesos Units 75 BEP
Fixed Costs ₱ 900,000.00 ₱ 900,000.00 25 Margin of Safety
Divide by:
CMR 0.6
CMU/UCM ₱ 300.00
BEP 1,500,000.00 3,000.00

Sales 2,000,000.00 4,000.00

Sales 2,500,000.00 5,000.00

Sales ₱ 2,500,000.00 5,000.00

Sales ₱ 3,750,000.00 7,500.00

Sales 3,000,000.00 6,000.00

Sales 5,094,339.53 10,189.00

Sales 3,600,000.00 7,200.00

Unit
5 6 7 8
6,000.00 10,188.68 10,189.00
500 100 3,000,000.00 100 5,094,339.62 5,094,500.00
200 1,200,000.00
300 60 1,800,000.00 60 60
120 30 900,000.00 17.666666667 25
180 30 900,000.00 42.333333333 35
5 150,000.00 5 5
25 750,000.00 37.333333333 100 30
25
28 75
 3,000.00
Margin of Safety
4,000.00 Sales 2,000,000.00 100 ###
Less: Variable Cost ###
Contribution Margin 1,200,000.00 60 ###
Less: Fixed Cost 900,000.00 ###
Operating Income 300,000.00 ###
Less: Interest Expense ###
Net Income before tax ### ###
Less: Income Taxes
Net Income

7,200.00
3,600,000.00
1,440,000.00
2,160,000.00
900,000.00
1,260,000.00
180,000.00
1,080,000.00 1,080,000.00
Problem 2. Short but very HMMMMM Company's income statement is shown below:
For #9
Total Per Unit %
Sales (30,000 units) ₱ 150,000.00 ₱ 5.00 ₱ 5.75 100.00
Less: Variable costs ₱ 90,000.00 ₱ 3.00 ₱ 3.00 52.17
Contribution margin ₱ 60,000.00 ₱ 2.00 ₱ 2.75 47.83
Less: Fixed costs ₱ 50,000.00
Operating Income ₱ 10,000.00

Requirement: Compute for the adjusted operating income and breakeven point in pesos for each independent sensitity an
9. Units sales price increases by 15% (2 points)
10. Unit variable costs decrease by 25% (2 points)
11. Total fixed costs increase to P80,000 (2 points)
12. Unit variable costs increased to 110%, the selling price increased to 120% (2 points).
13. The selling price increases by P0.50 per unit, fixed costs increase by P10,000, and the sales
volume decreases to 90% (2 points)

#9 #10 #11 #12

Sales ₱ 172,500.00 ₱ 150,000.00 ₱ 150,000.00 ₱ 180,000.00
Less: Variable Cost ₱ 90,000.00 ₱ 67,500.00 ₱ 90,000.00 ₱ 99,000.00
Contribution Margin ₱ 82,500.00 ₱ 82,500.00 ₱ 60,000.00 ₱ 81,000.00
Less: Fixed Cost ₱ 50,000.00 ₱ 50,000.00 ₱ 80,000.00 ₱ 50,000.00
Operating Income ₱ 32,500.00 ₱ 32,500.00 -₱ 20,000.00 ₱ 31,000.00

Fixed Cost ₱ 50,000.00 ₱ 50,000.00 ₱ 80,000.00 ₱ 50,000.00

Contribution margin rate 47.83% 55.00% 40.00% 45.00%
Breakeven point ₱ 104,545.45 ₱ 90,909.09 ₱ 200,000.00 ₱ 111,111.11
 For #10 For #12 For #13
% %
₱ 5.00 100.00 ₱ 5.50 100.00
₱ 2.25 55.00 ₱ 3.00 54.55
₱ 2.75 45.00 ₱ 2.00 45.45
₱ 60,000.00

Sales Volume 27,000.00

or each independent sensitity analysis:

#13
₱ 148,500.00
₱ 81,000.00
₱ 67,500.00
₱ 60,000.00
₱ 7,500.00

₱ 60,000.00
45.45%
₱ 132,000.00
Problem 3. Will Survive 2nd Year Company sells two products, BBM Lolipops and Lenlen Cotton Candies. The
sales and contribution margin ratio of these two products are given below:
BBM Cherry Lolipops Lenlen Cotton Candies
Sales ₱ 700,000.00 ₱ 300,000.00
Contribution margin ratio 60% 70% 65%

The company’s fixed costs and expenses total P756,000. The company’s average unit sales price is P60.

Requirement:
14. Average contribution margin ratio (1 point)
15. Composite breakeven sales in pesos (1 point)
16. Sales of BBM Cherry Lolipops and Lenlen Cotton Candies at breakeven point (2 points)
17. Net income for each of the two products, BBM Cherry Lolipops and Lenlen Cotton Candies, assuming
combined sales is P1,500,000. (2 points)

BBM Cherry Lolipops Lenlen Cotton Candies Total 14. ACMR(%)

Sales ₱ 700,000.00 ₱ 300,000.00 ₱ 1,000,000.00
Variable Costs ₱ 280,000.00 ₱ 90,000.00 ₱ 370,000.00
Contribution margin ₱ 420,000.00 ₱ 210,000.00 ₱ 630,000.00 63
Sales Mix Ratio 7 3

Fixed Costs 756,000.00

ACMR 63%
15. Composite BEP 1,200,000.00

BBM Cherry Lolipops Lenlen Cotton Candies Total

16. Sales at BEP 840,000.00 360,000.00 1,200,000.00
Sale in Units 14,000.00 6,000.00

BBM Cherry Lolipops Lenlen Cotton Candies Total

Sales ₱ 1,050,000.00 ₱ 450,000.00 ₱ 1,500,000.00
Variable Costs ₱ 420,000.00 ₱ 135,000.00 ₱ 555,000.00
Contribution margin ₱ 630,000.00 ₱ 315,000.00 ₱ 945,000.00
Fixed Costs 529,200.00 226,800.00 756,000.00
Net Income ₱ 100,800.00 ₱ 88,200.00 ₱ 189,000.00
17. Can't be determined Can't be determined
60 60
36 42
Sales 583,333.33 14
VC 333,333.33 8
CM 250,000.00 6 41,666.67 41,667.00
FC 200,000.00
NIBT 50,000.00 100%
IT 15,000.00 30%
NI 35,000.00 70%
Selling price per unit 14
Variable cost per unit 8
Contribution margin per unit 6

Before Tax Income in Pesos 50,000.00 100%

Income Tax 15,000.00 30%
After Tax Income in pesos 35,000.00 70%

Before Tax Income in Pesos 50,000.00

Fixed Cost 200,000.00
Contribution Margin 250,000.00
Divide by CMU 6
Required Units to Sell 41,667.00
Sensitivity Analysis
What if:
SPU increased by 20% 2.8
VCU increased by P5.0
Fixed Cost decreased by 50%

Required:
1. Compute BEP in units and sales
2. Compute Sales in units and pesos, if required after-tax profit is 200% higher than previous.

New
SPU 16.8
VCU 13
CMU/CMR 3.8

Fixed Cost 100,000.00

OLD
BEPU 41,666.67 BEPU 26,315.79
BEPS 583,333.33 BEPS 442,105.26

Before Tax Income in Pesos 150,000.00

Income Tax
After Tax Income in pesos 105,000.00

Before Tax Income in Pesos 150,000.00

Fixed Cost 100,000.00
Contribution Margin 250,000.00
Divide by CMU 3.8
Required Units to Sell 50,000.00 Required Units to Sell/Pesos 65,789.47
 23%

100%
30%
70%

1,105,263.16