Popeye's Olive Oil began business in January 2019, during which it produced 104,000 quarts of olive oil. For the year 2019, the company sold 100,000 quarts of olive oil at P10 per quart. Costs incurred during the year were as follows:

Ingredients usedP228,800

Direct labor104,000

Variable overhead197,600

Fixed overhead98,800

Fixed S&A expenses55,200

Variable S&A expenses0.50 per quart

Required:

1.Prepare an absorption costing income statement based on the given information.

2.Prepare a variable costing income statement based on the given information.

Problem 2:

Boise Corp had a margin of safety of $375,000 for the current month, with sales revenue of $1,000,000 and fixed costs of $250,000.

Required:

1.What are break-even sales?

2.What is the contribution margin ratio?

3.How much profit did Boise earn for this month?

4.How much would sales have to be for Boise to earn profit of $600,000?

5.What is Boise's degree of operating leverage this month?

6.Assume that in this item only, Boise is planning to automate its operations, which will increase fixed costs by $50,000 and decrease variable costs which in effect, increase its contribution margin ratio to 50% of sales. At what sales level would Boise be indifferent between the current and the new plan?

Problem 3:

Malibu, Inc., which has fixed costs of $2,150,000, sells three products whose sales price, variable cost per unit, and percentage of sales units are presented in the table below.

Product A Product B Product C

Sales price P7.00 P12.00 P25.00

Variable cost P3.00 P10.00 P12.00

Sales mix 60% 30% 10%

Required:

1.What is the weighted average unit contribution margin?

2.At the break-even point, how many units of Product A must be sold?

3.To make a profit of $1,075,000, how many units of Product B must be sold?