GOOD DAY sells a special type of flashlights which does not use dry-cell batteries but operates...

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GOOD DAY sells a special type of flashlights which does not use dry-cell batteries but operates with "sun energy". The product would incur a total variable cost of P18 per unit to manufacture and sell. The plant has a capacity of 20,000 units per month at P180,000 fixed costs and expenses, excluding its monthly interest charges of P45,000. This product has a contribution margin of 55%. At present the plant is operating at 80% of its capacity. Management plans to increase its current sales by 20% next year. a) Using the contribution margin approach, prepare an income statement at present operation. b) What is the break even point in units, and in Peso Sales? Show proof. c) If management plans to generate a profit of P150,000, how many units to sell? (show proof) d) At present operation, what is the operating leverage? e) What is the % increase in profit if current sales will increase by 20% next year? GOOD DAY sells a special type of flashlights which does not use dry-cell batteries but operates with "sun energy". The product would incur a total variable cost of P18 per unit to manufacture and sell. The plant has a capacity of 20,000 units per month at P180,000 fixed costs and expenses, excluding its monthly interest charges of P45,000. This product has a contribution margin of 55%. At present the plant is operating at 80% of its capacity. Management plans to increase its current sales by 20% next year. a) Using the contribution margin approach, prepare an income statement at present operation. b) What is the break even point in units, and in Peso Sales? Show proof. c) If management plans to generate a profit of P150,000, how many units to sell? (show proof) d) At present operation, what is the operating leverage? e) What is the % increase in profit if current sales will increase by 20% next year?

Answer rating: 100% (QA)

a Income Statement at Present Operation Sales Revenue 20000 units P18 variable cost per unit P360000 ... View the full answer