Rafael Luis C.

Pamonag May 24, 2021

BSBA-2B MWF(4PM-5PM)
FM121:Financial Analysis and Reporting Prof: Mr. Francisco A. Baraquel
Assignment
P-1
Outlast Company’s projected profit for the year is as follows:

Total Per Unit

Sales 200,000 20
Variable cost 120,000 12

Contribution margin 80,000 8

Total fixed cost 64,000

Operating Income 16,000

Required:
1. Compute the variable cost ratio. Compute the contribution margin ratio.
Answer:
Variable Cost Ratio = Variable cost/units

= ₱12/₱8,000
= 0.15%

Contribution Margin ratio = Contribution margin per unit/selling price per unit

= ₱8/₱20
= 40%

2. Compute the break-even point in units.

Answer:
𝐹𝑖𝑥𝑒𝑑 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
Break-even point in units =
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡−𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡

₱64,000
=
₱20− ₱12

₱64,000
=
₱8

= ₱𝟖, 𝟎𝟎𝟎. 𝟎𝟎 units

3. Compute the break-even point in sales value.
Answer:
𝐹𝑖𝑥𝑒𝑑 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
Break-even sales value =
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛 𝑟𝑎𝑡𝑖𝑜

₱64,000
=
0.40

= ₱𝟏𝟔𝟎, 𝟎𝟎𝟎. 𝟎𝟎
4. Create a break-even graph

Total costs Sales

2000 88,000 40,000
4000 112,000 80,000
6000 136,000 120,000
8000 160,000 160,000

Break-even Analysis
350,000

300,000

250,000

200,000

150,000

100,000

50,000

0
2000 4000 6000 8000

Total costs Sales

5. How many units must be added to earn a profit of ₱30,000?

Answer:
BE Units= ₱30,000/20 per unit
= ₱1,500 units
 6. Using the contribution margin ratio in #1 above, compute the additional profit that Outlast
would earn if sales were ₱25,000 more than expected.
Answer:
𝐹𝑖𝑥𝑒𝑑 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
Break-even sales Amount =
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛 𝑟𝑎𝑡𝑖𝑜

₱25,000
=
0.40

= ₱𝟔𝟐, 𝟓𝟎𝟎. 𝟎𝟎

P-2
Hammond Company produces a single product with a price of ₱12/unit, variable cost per unit of ₱3,
and total fixed cost of ₱7,200.
1. Compute the break-even sales in units and sales amount.
Answer:
𝐹𝑖𝑥𝑒𝑑 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
Break-even sales in units =
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡−𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡

₱7,200
=
₱12− ₱3

₱7,200
=
₱9

= ₱𝟖𝟎𝟎. 𝟎𝟎 𝐮𝐧𝐢𝐭𝐬

𝐹𝑖𝑥𝑒𝑑 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
Break-even sales Amount =
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛 𝑟𝑎𝑡𝑖𝑜

₱7,200
=
0.75

= ₱𝟗, 𝟔𝟎𝟎. 𝟎𝟎
 2. Compute the variable cost ratio. Compute the contribution margin ratio.
Answer:
Variable Cost Ratio = Variable/units

= ₱3/₱800
= 0.375%

Contribution Margin ratio = Contribution margin per unit/selling price per unit

= ₱9/₱12
= 75%

P-3
Hammer Head Company plans to sell 5,000 bicycle helmets at ₱750 each in the coming year. Unit
variable cost is ₱450 (includes direct materials, direct labor, variable factory overhead and variable
selling expenses). The total fixed cost equals ₱495,000 (includes fixed factory overhead and fixed
selling and administrative expenses).
1. Calculate the break-even number of helmets to be sold.
Answer:
BEP= Total Fixed Cost / (Price-Variable cost per unit)
= ₱495,000 / (750-450) = ₱495,000 /300
= 1,650 units to be sold

2. Prepare a proforma income statement to check your answer.