XYZ Company plans to introduce a new product in August.

Information on selling price and

related costs for the new product is shown below:

Selling price per unit P36.00

Variable cost per unit:
Direct materials 15.00
Direct labor 9.00
Manufacturing overhead 4.00
Sales commission 2.00
Monthly fixed costs:
Manufacturing overhead P40,000
Administrative cost 32,000
Actual units produced 15,000

Required:

a. Break-even point in units

¿
BEP in units = Total ¿ cost CM per unit

40,000+32,000
=
36−(15+9+ 4+2)

72,000
= 36−30

72,000
=
6

= 12,000 units

b. Break-even point in pesos

 ¿
BEP in pesos = Total ¿ cost CM ratio

72,000
=
6

= 12,000 x 36

= P432,000

c. Margin of safety in units

MS in units = Sales in units – BEP in units

= 15,000 – 12,000

= 3,000 units

d. Margin of safety in pesos

MS in units = Sales in pesos – BEP in pesos

= (36 x 15,000) – 432,000

= 540,000 – 432,000

= P108,000

e. Desired sales in units to earn a profit of P12,000

¿
Desired sales in units = Total ¿ Cost + Target Profit CM per unit

72,000+ 12,000
=
6
 84,000
=
6

= 14,000 units

f. Desired sales in pesos to earn a profit of P12,000

¿
Desired sales in pesos = Total ¿ Cost+ Target Profit CM ratio

72,000+ 12,000
=
6

84,000
=
6

= 14,000 x 36

= P504,000