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1. Garfield Company, which sells a single product, provided the following data from its income

statements for the calendar year 2004 and 2003:

Base

year Base year

2004 2003 2004 2003

Unit sold 150,000 180,000 Cost of sales 525,000 575,000

sales 750,000 720,000 Gross profit 225,000 145,000

In an analysis of variation of gross profit between two years, what would be the effects

of changes in sales price and sales volume?

a. 150,000 F 120,000 UF c. 180,000 F 150,000 UF

b. 150,000 UF 120,000 F d. 180,000 UF 150,000 F

2003 Unit selling price: (P720, 000 / 180,

000)= 4.00

Increase in selling price P1.00

x 2004 units sold 150,000

Sales price- favorable P150,000

x 2003 selling price P4.00

sales volume- unfavorable P120,000

other information related to the said products are as follows:

X 15,000 10 P150,000 P12,0000

Y 20,000 8 160,000 140,000

Z 5,000 6 30,000 22,500

2004 UNITS UNIT PRICE TOTAL SALES COST OF SALES

X 20,000 12 P240,000 P180,000

Y 20,000 9 180,000 150,000

Z 4,000 5 20,000 16,000

Based on the above, an analysis of the gross profit would show the following changes:

a. P56, 000 F b. P100, 000 UF c. P100, 000 F d. P56, 000 UF

2004 sales @ 2003 prices:

x- 20,000 x P10 = P200,000

y- 20,000 x P8 = 160,000

z- 20,000 x P6 = 24,000 384,000

sales price factor- favorable P56,000

a. P28, 000 F b. P28, 000 UF c. P63, 500 F d. P63, 500 UF

2004 cost of sales @ 2003 costs:

x- 20,000 x P8= P160,000

y- 20,000 x P7 = 140,000

z- 4,000 x P4.50 = 18,000 318,000

cost price factor- unfavorable P28,000

a. P4, 000 F b. P4, 000 UF c. P5, 750 F d. P5, 750 UF

C. 2003 sales ( 150,000 + 160,000 + 30,000 )= P340,000

2003 cost of sales :(120,000 + 140,000 +22,500)= 282, 500

2003 Gross profit 57, 500

2003 Average gross profit per unit = P57, 500 = P1.4375

(15,000+ 20,000+5,000)

Increase in units sold (44,000 -40,000) 4,000

x Average gross profit per unit P1.4375

Quantity factor- favorable P5, 750

a. P2, 500 F b. P2, 500 UF c. P2, 750 F d. P2, 750 UF

2004 cost of sales @ 2003 costs 318,000

2004 gross profit @ 2003 prices and cost P66,000

2004 average GP/ unit @ 2003 prices (P66, 000 / 44,000) = P1.5000

2003 average GP/ unit 1.4375

increase in average GP / unit P0.0625

x 2004 units sold 44,000

sales mix factor- favorable P2, 750

The president of Pure Company, after being informed that the 2004 selling price was 6%

lower than 2003, would like to know other factors that changes the gross margin as shown

below:

2003 2004

Net sales P420, 000.00 P426, 384.00

Cost of sales 243, 600.00 276, 242. 40

Gross margin P176, 400.00 P150, 141.60

6. An increase (decrease) in net sales due to sales price of

a. P33, 600 b. P27, 216 c. P(33,600) d. P(27,216)

D.

2004 actual sales P426, 384

2004 sales @ 2003 prices (426, 384/ 94%) = 453, 600

Decrease in net sales due to sales price P(27,216)

a. P19,488.00 b. 13,154.40 c. P(13,154.40) d. P(19,488.00)

2003 actual sales 420,000

Increase in net sales due to volume P33, 600

Volume percent increase (P33, 600/ P420, 000) = 8%

2004 cost of sales P276, 242.40

2004 cost of sales @ 2003 costs ( 243, 600 x 108%) 263, 088.00

Increase in cost of sales due to cost factor P13, 154.40

a. 13,154.40 b. P19, 488.00 c. P(13,154.40) d. P(19,488.00)

B.

2004 Cost of sales at 2003 costs P 263, 088

2003 Cost of sales 243, 600

Increase in cost of sales due to volume P19, 488

a. 8% b. (6%) c. 5% d. (5%)

10. A percent increase (decrease) in unit cost of

a. 8% b. (6%) c. 5% d. (5%)

The management of Batman Company asked you to submit an analysis of the increase in

their gross profit in 2004 based on their past two-year comparative income statements which

are shown below:

2003 2004

Net sales P1, 237, 500 P1, 000, 000

Cost of sales 950, 000 800,000

Gross margin P 287, 500 P200, 000

The only known factor given to you is that sales price increased 12.5% beginning January, 2004.

a. P50, 000 b. P35, 000 c. P 20, 000 d. None of the above

2003 actual sales 1,000,000

Increase in net sales due to volume P100, 000

percent increase in volume (P100,000/ P1,000, 000) = 10%

2004 cost of sales @ 2003 costs (800,000 x 110%) = P880, 000

2003 actual cost of sales 800, 000

Increase in cost of sales due to volume P80,000

Increase in gross profit due to volume (100,000 - 80,000) = P20, 000

12. Gross profit declined due to increase in cost in the amount of

a. P70, 000 b. P88, 000 c. P97, 500 d. None of the above

A.

2004 Cost of sales P 950, 000

2004 Cost of sales at 2003 costs (above) 880, 000

Decline in gross profit due to increase in costs 70,000

P100, 000 b P 137, 500 c. P110, 000 d. None of the above

B.

2004 actual sales P1,237,500

2004 sales @ 2003 prices 1,100,000

Increase in gross profit due to sales price 137, 500

a. 12.750% b. 11.000% c. 15.125% d. None of the above

a. 10.794% b. 10.000% c. 8.675% d. None of the above

Manly Company has the following data available for gross profit analysis:

2003 Prod. A Prod. B Prod. C Total

P225,

Sales 000 P240,000 P45,000 P510,000

Cost of sales 180,000 210,000 33,750 423,750

No. of units 22,500 30,000 7,500 60,000

Sales P360,000 P270,000 P30,000 P660,000

Cost of sales 270,000 225,000 24,000 519,000

No. of units 30,000 30,000 6,000 66,000

a. P150, 000 UF b. P150, 000 F c. P84, 000 UF d. 84, 000 F

2004 sales @ 2003 prices :

a - 30,000 x (225,000/22,500)= 300,000

b- 30,000 x (240,000/ 30,000)= 240,000

c- 6,000 x (45,000/7,500) = 36,000 576,000

sales price factor- favorable P84,000

a. P95, 250 UF b. P61, 500 UF c. P42, 000 UF d. P33, 750 F

C.

2004 cost of sales P519, 000

2004 cost of sales @ 2003 prices :

a - 30,000 x (180,000/22,500)= 240,000

b- 30,000 x (210,000/ 30,000)= 210,000

c- 6,000 x (33,750/7,500) = 27,000 477,000

cost price factor- unfavorable P42,000

18. The 2004 average gross profit per unit at 2003 prices and costs is

a. P1.4375 b. P1.45 c. P1.50 d. P2.1363

(576, 000 -477, 000)/ 66, 000 = P1.50

a. P8, 625 F b. P46, 125 UF c. P12, 816 F d. P9, 075 UF

A. 2003 average gross / unit (510, 000 423, 750)/ 60,000 = P1.4375

X Increase in units sold (66, 000 60,000) 6,000

Quantity factor- favorable P 8. 625

a. P14, 124 F b. P 4, 125 UF c. P4, 125 F d. P14, 124 UF

2003 average gross profit / unit (510, 000- 423,750)/ 60,000= 1.4375

Increase in average GP/ unit P0.0625

X 2004 units sold 66,000

Sales mix factor- favorable P 4, 125

For the year ended December 31, 2003 and 2004 the following data were presented to

the management of Leander Company:

2004 P1, 363, 000 P911, 800 P451, 200

2003 1, 250, 000 776, 000 474, 000

The management requested you to determine the cause of the decline in gross profit on sales in

spite of the favorable information given by the sales division that the quantity sold in 2004 was

higher than in 2003 and that the production costs in 2004 were lower than that of 2003 by 6%.

a. 17.5% b. 14.0% c. 25.0% d. 20.0%

2003 cost of sales 776,000

Increase in cost of sales due to volume 194,000

percent increase in volume ( 194,000/ 776, 000) = 25%

a. (P135, 800) b. 135, 800 c. (58, 200) d. 58, 200

C.

2004 cost of sales = P911,800

2003 cost of sales at 2003 costs (911, 800 / 94%) 970,000

Decrease in cost of sales due to cost factor P(58, 200)

a. (17.5%) b. 17.5% c. (12.768%) d. 12.768%

C.

2004 sales P1, 363, 000

2004 sales at 2003 prices (1,250,000 x 125%) = 1, 562,500

Decrease in net sales due in price factor P (199, 500)

Percent decrease in price (199,500)/ 1,562,500= (12.768%)

a. (P194, 000) b. P194, 000 c. (P312, 500) d. P312, 500

D.

2004 sales at 2003 prices (1,250,000 x 125%) = 1, 562,500

2003 sales 1,250,000

Increase in net sales due in volume factor P 312, 500

a. (P113, 000) b. P113, 000 c. (P199, 500) d. P199, 500

C. 2004 sales 1, 363,000

2004 sales at 2003 prices (1,363,000 x 87.232%) = 1,562,500

Decrease in net sales due to price factor P (199, 500)

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