Data with respect to a basic product line sold by Fabula Company are as follows:

Selling price per unit P50

Variable manufacturing costs per unit 20

Variable selling and administrative costs per unit 10

Fixed manufacturing costs P160,000

Fixed selling and administrative costs 200,000

Sales in units 24,000 units

REQUIRED:

1. Compute the contribution margin per unit and calculate the break-even point in units. Calculate the contribution margin ratio and the break-even sales revenue.
2. The company plans to acquire equipment that is expected to increase production and sales by 20%. The new equipment will be depreciated on a straight line basis for P40,000 per year. By how much will operating income increase or decrease as a result of this action? Profit increase:
3. Refer to the original data.
   1. How much sales must be generated to earn pre-tax profit of P200,000?
   2. How many units must be sold to earn an after-tax profit of P210,000?Assume a tax rate of 30 percent.
   3. How much must sales be to earn pre-tax profit of 10% of such sales?
   4. How much sales must be to earn after tax profit of 10.5% of sales?
4. Compute the margin of safety based on the original income statement.
5. Compute the degree of operating leverage based on the original income statement. If sales revenues are 20 percent greater than expected, what is the percentage increase in profits?