MIDTERM-TASK PERFORMANCE

1. In planning its operations for next year based on a sales forecast of ₱6,000,000, Herran,
Inc. prepared the following estimated costs and expenses:

Variable Fixed
Direct Materials 1,600,000 ? 3,900,000
Direct Labor 1, 4000,000 ? 1,400,000
Factory overhead 600,000 900,000
Selling expenses 240,000 360,000
Administrative expenses 60,000 140,000

What would be the amount of peso sales at the breakeven point?

Answer:
CM ratio = (6,000,000 – 3,900,000) / 6,000,000 = 35%
Break even sales = (1,400,000 / 35%) = 4,000,000

2. The following economic data were provided by the corporate staff of Heaven, Inc.

Sales volume 30,000 units

Sales price per unit ₱30
Unit variable cost:
Variable manufacturing cost 13
Other variable costs 8
Unit variable costs 21
Unit contribution margin 9

Fixed costs:
Manufacturing 150,000
Other fixed costs 50,000
Total fixed costs 200,000

The management is considering installing a new, automated manufacturing process that

will increase fixed costs by ₱50,000 and reduce variable manufacturing cost by ₱3 per
unit. The management set a target profit of ₱70,000 before and after the acquisition of
the automated machine. After installation of the automated machine, what will be the
change in the units required to achieve the target profit?
 Answer: 3,333 unit decrease

3. The Alpine Company’s year-end income statement is as follows:

Sales (20,000 units) 360,000

Variable costs 220,000
Contribution margin 140,000
Fixed costs 105,000
Net income 35,000

Alpine’s management is unhappy with the results and plans to make some changes for
the next year. If management implements a new marketing program, fixed costs are
expected to increase by P1 per unit. Unit sales are expected to increase by 15 percent.

What is the effect on income if the foregoing changes are implemented?

Answer: Decrease of 21,200

4. Below is the income statement for Harpo Co. for 2020:

Sales 400,000
Variable costs (125,000)
Contribution Margin 275,000
Fixed costs (200,000)
Profit before tax 75,000

Assuming that fixed costs are expected to remain at ₱200,000 for 202, and the sales
price per unit and variable cost per unit are also expected to remain constant, how
much profit before tax will be produced if the company anticipates 2021 sales rising to
130% of the 2020 level?

Answer:
Contribution Margin *1.20 = New Contribution Margin 275,000 *1.20 = 357,000
Contribution Margin – Fixed Costs = Profit (357,000- 200,000) = 157,500

5. A business operating at 90% of capacity and is currently purchasing a part which is being
used in its manufacturing operations for ₱15 per unit. The unit cost for the business to
make is the part is ₱20, including fixed costs, and ₱12, not including fixed costs. If
30,000 units of the part are normally purchased during the year end but could be
manufacture using unused capacity, explain the effects of differential cost increase or
decrease, from making the part rather than purchasing it?

Answer: (15- 12) *30,000 = 90,000 cost decrease