Saint Ferdinand College

College of Accountancy

Name: ______________________________________________ Score: ______

Year and Section: ____________ Date: _______

A company’s break-even sales are P 15,084,000. The variable cost ratio is 25% while the degree of operating leverage is 3. Determine the
following:

1. Fixed Costs

BES = FC/CMR
15,084,000 = FC/75%
FC = 11,313,000

2. Margin of Safety Ratio

MOSR = 1/dol = 1/3 = 33.33%

3. Sales

PR = CMR/dol = 75%/3 = 25%

*squeeze niyo yung Fixed Cost Ratio
Sales = FC/.5=11,313,000/.5 = 22,626,000

4. Profit if the sales are 32,000,000.

32,000,000 * (CMR, 0.75) para makuha yung contribution margin then ibawas niyo yung fixed costs, giving you 12,687,000

5. Variable Costs

Mahahanap niyo na yan after computing for number 3, which is Sales*VCR = 22,626,000*25% = 5,656,500

6. Sales required for a profit of 100,000.

Sales = (FC+DP)/CMR = (11313000+100000)/.75 = 15,217,333.33

7. Contribution Margin
Sales*CMR=22,626,000*.75= 16,969,500

8. Sales required for a profit margin of 25%.

Sales = FC/(CMR-PR) = 11313K/ (.75-.25) = 22,626,000

9. Profit
Sales*Profit Margin or CM less the FC = 5,656,500

10. Sales required for an after-tax profit of 200,000 (tax rate: 20%).
Sales = (FC+Profit before Tax)/CMR = (11,313,000 + 200K/.8)/.75 = 15,417,333.33

A company’s break-even sales are P20,000,000. The variable cost ratio is 40% less than the contribution margin ratio while the degree of
operating leverage is 3. Determine the following:

We can interpret the second statement in two ways. First, the VCR is 60% of the CMR; pangalawa, the CMR is 70% while the VCR is 30%. Kapag
ginamit natin yung first assumption, the CMR will be 62.5%. If we use the second one, the CMR is surely 70%.

Using the second assumption in which the CMR is 70%. The VCR would be 30%. ALWAYS REMEMBER: VCR + CMR = 1

11. Fixed Costs

BES = FC/CMR
20,000,000 = FC/62.5%
FC = 12,500,000

12. Margin of Safety Ratio

MOSR = 1/DOL = 1/3 = 33.33%

13. Sales
After niyong makuha yung FC, hanapin niyo na yung PR. Gamitin natin yung DOL, as DOL = CMR/PR.
3 = 62.5%/PR
Manipulating the formula, we will get a PR of 20.83%
Then, we can use the PR to squeeze the Fixed Cost Ratio, which is 41.67%.
Tapos, divide natin yung Fixed Cost Ratio over the FC to get the Sales.
Sales = FC/FCR = 12,500,000/.41666667
Sales = 30,000,000

14. Profit if the sales are 22,000,000.

= CM – FC
= CMR*Sales – FC
= 22,000,000*.625 – 12,500,00
= 1,250,000

15. Variable Costs

= Sales*VCR = 30,000,000*37.5% = 11250000
16. Sales required for a profit of 100,000.
Sales = (FC+DP)/CMR = (12,500,000+100,000)/.625 = 20,160,000

17. Contribution Margin

CM = Sales – VC = 30,000,000 – 11,250,000 = 18,750,000

18. Sales required for a profit margin of 15%.

Sales = FC/(CMR-PR) = 12,500,000/(.625-.15) = 26,315,789.47

19. Profit
CM – FC = 18750K – 12500K = 6250K

20. Sales required for an after-tax profit of 2,000,000 (tax rate: 20%).
Sales = (FC+DP (before tax))/CMR = (12,500,000+2,500,000)/.625 = 24,000,000

Using the SECOND assumption in which the CMR is 70%. The VCR would be 30%.

11. Fixed Costs

BES = FC/CMR
20,000,000 = FC/70%
FC = 14,000,000

12. Margin of Safety Ratio

MOSR = 1/DOL = 1/3 = 33.33%

13. Sales
After niyong makuha yung FC, hanapin niyo na yung PR. Gamitin natin yung DOL, as DOL = CMR/PR.
3 = 70%/PR
Manipulating the formula, we will get a PR of 23.33%
Then, we can use the PR to squeeze the Fixed Cost Ratio, which is 46.67%.
Tapos, divide natin yung Fixed Cost Ratio over the FC to get the Sales.
Sales = FC/FCR = 14,000,000/.46666667
Sales = 30,000,000

14. Profit if the sales are 22,000,000.

= CM – FC
= CMR*Sales – FC
= 22,000,000*.7 – 14,000,000
= 1,400,000

15. Variable Costs

= Sales*VCR = 30,000,000*30% = 9,000,000
16. Sales required for a profit of 100,000.
Sales = (FC+DP)/CMR = (14,000,000+100,000)/.7 = 20,142,857.14

17. Contribution Margin

CM = Sales – VC = 30,000,000 – 9,000,000 = 21,000,000

18. Sales required for a profit margin of 15%.

Sales = FC/(CMR-PR) = 14,000,000/(.7-.15) = 25,454,545.45

19. Profit
CM – FC = 21M – 14M = 7,000,000

20. Sales required for an after-tax profit of 2,000,000 (tax rate: 20%).
Sales = (FC+DP (before tax))/CMR = (14,000,000+2,500,000)/.7 = 23,571,428.57