ACC5 - GUIDED EXERCISES

CVP ANALYSIS

PROBLEM 1
Genevieve Co. and Odessa Co. sell the same product in a competitive industry. Thus, the
selling price of the product for each company is the same. Other data about the two companies
are as follows:

Genevieve Co. Odessa Co.

Fixed Costs P50,000 P70,000
Contribution margin ratio 40% 52%

1. The company’s breakeven points are:

a. Genevieve Co.
b. Odessa Co.
2. The indifference point in terms of peso sales volume where the peso profits of the two
companies are equal is ________.
3. At the indifference point, the companies’ profit amounts to _______.

PROBLEM 2
Basic Illustration Corp. produces and sells a single product. The selling price is P25 and the
variable costs is P15 per unit. The corporation’s fixed costs is P100,000 per month. Average
monthly sales is 11,000 units.

4. The corporation’s contribution margin per unit and as a percent of sales (CMR) is
_________.
5. The corporation’s break-even point is _____________.
6. If the corporation desires to earn profit of P20,000 before tax, it must generate sales of
_________.
7. If the corporation pays corporate income tax at the rate of 30% and it desires to earn
after-tax profit of P21,000, it must generate sales of ________.
8. How much sales (in pesos) must be generated to earn profit that is 8% of such sales?
________.
9. How many units must be sold to earn profit of P2 per unit? ___________.
10. With an average monthly sales of 11,000 units, the corporation’s margin of safety is
_______.