EME

74. Information concerning Nabel Corporation's Product A is as follows:

Sales PA4Q

Variable costs P240.000

Fixed costs P 40.000

Assuming that Nabel increased sales of Product A by 20%, what should

the net income from Product A be?

a. P20,000 C. P32,000

b. P24,000 d. P80,000 (AICPA adapted)

Answer: C

Supporting Analysis/Computation:

Sales P360,000

Variable costs 288,000

Contribution margin P 72,000

Fixed costs 40.000

Net income P

siftations

The following information pertains to questions 75 through 77:

Sandy Tan is a distributor of brass picture frames. For 2006, she plans to

purchase for P30 each and sell them for P45 each. Sandy's fixed costs are

expected to be P240,000. Sandy's only other costs will be variable costs of P60

per shipment for preparing the invoice and delivery documents, organizing the

delivery, and following up for collecting accounts receivable. The P60 cost will

be incurred each time Sandy ships an order of picture frames, regardless of the

number of frames in the order.

75. Suppose Sandy sells 40,000 picture frames in 1,000 shipments in 2006,

what is the Sandy's operating income for 2006?

a. P300,000

b. P420,000
3A-33

C 1'2.10,01X1

d. p.f ~0,111X)

Suppose Sandy sells 40,000 picture fames in 800 shipments in 2006,

what is the Sandy's operating income For 2006?

a 1140,0(X)

h. 11325'(0)

c. 1121 1 ,0(X)

d. N 12.0(X)

Suppose Sandy anticipates making 500 shipments in 2006. How many

picture trarnes must Sandy sell to break even in 2006?

;r. 18.000

h. 12.000

c 1 4,000

d. 10,000

Supporting Anal►,sWC ompatation:

(75) Answer: A

Operating

income Revenues - Cost o Quaiitrtn of

prc tore xpich►re frames

Cost of NI11111pel.

shipment x s•Irrpnr n►s -Fixed costs

(P45 x 40,000) - (P30 (40,000) -- (P60 x 1,000) - P240.000

P1,800,000 - P 1, 200, 000 - P60, 000 - P240, 000 =1!. QQQQQ

(76) Answer: D

Operating

income ` Revenues Cost „ f Quantity of 1 -

I,w,u ' x picture J

C

C Cost ofVrrnrber r,/1

- Fixed costs

shipment x spiprnc'nr.c J

(P45 x 40, 000) - (P30 x 40,000) - (P60 x 800) - P240, 000

Cost-Volume-Profit Relationships