ipstructions: Compute the de, Assume that satee 2 °PEtAting lever, Peverie dee oth company. 8 by 20%. Pre are a variable cost © conting income statement for each company, Investment A and investment & Uses a mechanized system. Variable an are shown below Variable costs £00,000 ae Contribution margin 400,000 Fixed costs 200,000 S00 Net income - 200,000 ‘The analyst is interested in acquiring anes. : acquiring one of ie vote conpen a ened mie Sorrel instructions: a. Calculate each company's degree of operati perating leverage. b, Determine the affect on each company's net income if sales decrease by 10% and if sales increase by 20%. Do not prepare income statements, 46 Tony Galvez is the manager of Big Sister Studio who produces short films. Each Sunday aflm has two showings. The admission price is deliberately set ata very low P2. A maximum <é500 tickets is sold for each showing, The rental of the auditorium is F220 and labor is F290, induding P60 for Galvez. Galvez must pay the film distributor a guarantee, ranging from F200 1b P600 or 50% of gross admission receipts, whichever is higher. Before and during the spew refreshments are sold; these sales average 12% of gross admission receipts and yield a ontribution margin of 40%. ions: 1 On june 3, Galvez played “Only You", The sm sce Te inte distri P500, or 50% of gross admiss jnicheve See nt roded for the Students Association, which sponsored the showing? : 2 pe the results if the film grossed P90 f that each fighter would ‘ boxing match stated nid Sports News accounts of @ middle- ‘be shown on eos ccar eine : ‘eve a flat fee of P3 milion in ash Ty m owen wou un Deca pont, Many rept il pe ah apedividual local revive P3000 from Gateway Cen ns ee Facer seals, Y Ponce ald not share eaChase 8 Cine ov ang ties in the Channel a5 cy, 4 Operates ay proper t 85 Cinems ters 10 high-volume, pig” chain vary from I rg macs fant HEI, mann Cn oweraune encenaege ‘ners to ell pope Wad MES opcom on tag ath The management le conerng score Poche i ey ere sat rented 0 increase ptyngee Sa, The propre tee oun ee Pe 1 Pn on pe machi annual costs and operating coms ecines, Te mastneettes Chacspmerrae etGuaaanpeay No te TT Economy [R [Rua capacity | Beonomy _ Bier res 300,000 boxes [- Annual machine ena — pga ‘Popcorn cost per box} P20,200 ‘Cost of each box i E (Other Variable costs per box itionwide chain of movie theaters. The 500 4, Could the management use the average number of boxes sold per seat for the entire chain and the capacity of each theater to develop this decision rule? Explain your answer Mart, Inc. produces stereo components which sell for P100 per unit. The following costs for the next year are as follows: Total fixed costs *P200,000 5,000 50,000 500,000 estimated ympany can change its production process by adding P400,000 ents Sid F000 fotbied operating cost. This change wil () reduce variable it by P10 and (2) increase output by 2,000 units, but (3) the sales price on all units ® to be lowered to P95 to permit sales of the additional output. The company uses no[tat [Total per unit Monthly fixed costs 1, Compute the budgeted profit at the ex and the new production eorira ne Peed volume of 60000 units under both the old 2 Compute the budgeted break. eticrortissis “even point under both the old and the new production 3, Discuss the effect on profits if volume new production environments, 4 Discuss the effect on profits if volume increases to the new production environments, eens falls to 500,000 units under both the old and the 46 Diva Manufacturing Inc. produces two products: Product A and Product B Product A is, standard product with many competitors. Product B is a new product with few competitors. Sales of Product B are well above expected; however, Product A is losing market share lower priced competitors. Product A Product B Selling price per unit P1500 35.00 Variable costs per unit P750 20.00 Monthly fixed costs (allocated) P450,000 50,000 Monthly sales in units 90,000 10,000 ‘structions: 1. Compute the monthly sales level in units at which Product B makes a profit of 20% on Man idering reducing the price ofthe Product A. If sales are 90,000 units 2. Management is consi permonth, what is the breakeven price for the Product A? a Resort is show below. F statement for Pamana Island Hotel & pore income taxes) 500,000 Fe 00,000 Variable expenses 200,000 Contribution margin Fixed expenses ean Net income A contributionantec 4 Cost Vole Prt Anais Instructions: 418 Bowl has sold 3 units of product P for every unit of product f the hotel's revenue intag 1. Show the hotel's cost structure by indicating the Per tement. se the contribution Tepesented by ech em nthe income sie 5) U 2. Suppose the hotel's revenue declines by 15 P i” margin ratio to calculate the effect in net incom * 9000098 vol ot 3. Whatis the hotel's ope factor at P5000 a net Use the operating lev or to calculate the increased by 5 percent (5%). sek Determine the new cost structure of the hot ara yok and fi er Vane of ales inceats by 20 percent 2 i : Fa remeron donbles Te (670 EI Staal gem tw ing the following independent wed expenses increase by 3 ucts, P and B. In prior year, Punch ‘The Punch Bow Corp. produces and soll two products F 70 NT these products show the following: P B Unit selling price 10.00 me Unit variable cost (7 ae ‘Total fixed cost of P6D0,000 For the coming year, the sales mix is expected to change so that 2 units of product B wil besold for every unit of product P Instructions: 1. Determine the number of units for each product that must be sold in order to: the total fixed cost in prior year. 2 Determine the number of units for each product that must be sold in the coming, {in order to break even. 3. Determine the number of units for each {in order to realize a profit of P500,000 Determine the weighted contribu Determine the total contribution product that must be: sold in the com before tax, ming tion margin per unit in prior year. ‘margin nthe coming year. fixed costs of production ime before the plant has ween 3,000 and 4000 units margin of safety and the sis, the accountant tells youa eae = cons Of safety for 3,000 and 4,000 units, ae la the conan ct OPerating leverage for 3,000 andl 4,000 units. termine the ex, manufay What do hee ictuting profit or loss at 3,000 and 4,000 units " Safety and degree of tating leverage tell you about what will happen to profit as sales move from 3,000 to 404 units? f wo Dennis Goods Company Prepared the following preliminary forecast concerning, seu forthe current year assuming no expenditure foradvertsine 100,000 P600,000, 300,000, that it could increase the rket study conducted, the company estimated = eS andi se the unit sales volume by 10% if P100,000 were spent anit i rere - it’s the coming year’s _ istructions: that the company in Bae eee Cr) bes ‘aecast, what should be the operating inco