POLYTECHNIC UNIVESITY OF THE PHILIPPINES

STA. MESA, MANILA

Strategic Management Accounting MAY, 20201

Module 02A: Cost-Volume-Profit Analysis Instructor: John Bo S. Cayetano

Use the following information for the next two (2) questions:
Stairway Company sells a single product. The company’s most recent income statement is given below:
Sales (5,000 units) 200,000
Less: Variable expenses 120,000
Contribution margin 80,000
Less Fixed overhead 48,000
Operating income 32,000
1) What is the contribution margin per unit?
A. 16 per unit
B. 6.4 per unit
C. 40 per unit
D. 24 per unit

2) If sales are doubled to P400,000, how much is the total expected variable cost?
A. 240,000
B. 200,000
C. 360,000
D. 300,000

3) If sales are doubled to P400,000, how much is the expected total fixed cost?
A. 96,000
B. 48,000
C. 116,000
D. 57,500

4) If 100 more units are sold, how much increase in profit is expected?
A. 1,600
B. 33,600
C. 6,000
D. 640

5) Janet Company produces a game that sells for P17 per game. Variable expenses are P9 per game and fixed
expenses total P172,000 annually. The contribution margin ratio is closest to:
A. 47.1%
B. 2.1%
C. 1.9%
D. 52.9%

6) Double Dragon Company produced 500 units of a product and incurred the following costs:

Direct materials P 8,000

Direct labor 10,000
Overhead (20% fixed) 45,000

If sales revenue of 500 units is P102,000, what is the contribution margin percentage?
A. 44%
B. 47%
C. 53%
D. 74%

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7) A recent income statement of Nixon Corporation reported the following data:

Sales revenue P 5,000,000

Variable costs 3,000,000
Fixed costs 1,600,000

If these data are based on the sale of 10,000 units, the contribution margin per unit would be:
A. 40
B. 140
C. 200
D. 460
8) The following information pertains to Rica Company:
Variable Fixed
Manufacturing costs P340,000 P 70,000
Selling and administrative expenses 10,000 60,000
During the year, the company sold 50,000 units for P1,000,000. How much is Rica's break-even point in number of
units?
A. 9,848
B. 10,000
C. 26,000
D. 18,571

9) DEF Company is a retailer for video disks. The projected net income for the current year is P200,000 based on sales
volume of 200,000 video disks. DEF has been selling the disk for P16 each. The variable cost consist of P10 unit
purchase price of the disks and handling cost of P2 per disk.
DEF’s annual fixed costs are P600,000. What is the company’s break-even point for the current year in number of
video disks?
A. 152,000
B. 150,000
C. 155,000
D. 140,000

10) Asher Company manufactures fans with direct material costs of P10 per unit and direct labor of P7 per unit. A local
carrier charges Asher P5 per unit to make deliveries. Sales commissions are paid at 10% of the selling price. Fans
are sold for P100 each. Indirect factory costs and administrative costs are P6,800 and P37,200 per month,
respectively.

How many fans must Asher produce to break even?

A. 1,375
B. 647
C. 564
D. 530

11) Given the selling price at P120 per unit; contribution margin ratio at 25% and fixed costs of P250,000, the total
variable expenses at the break-even point would be:
A. 350,000
B. 750,000
C. 450,000
D. 250,000

12) The following information pertains to Mete Company:

Sales P400,000
Variable costs 80,000
Fixed costs 20,000

Mete’s breakeven point in peso sales is

A. 20,000
B. 25,000
C. 80,000
D. 100,000

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Use the following information for the next two (2) questions:
Swift, Inc., produces only two products, AAA and BBB. These account for 60% and 40% of the total sales of Swift,
respectively. Variable costs (as a percentage of sales peso) are 60% for AAA and 85% for BBB. Total fixed costs are
P150,000. There are no other costs.

13) What is Swift’s breakeven point in peso?

A. 150,000
B. 214,286
C. 300,000
D. 500,000

14) Assume that the total fixed costs of Swift increase by 30%, what amount of total sales would be necessary to
generate a net income of P9,000?
A. 204,000
B. 464,000
C. 659,000
D. 680,000

15) John Jordan, a sole proprietor, had the following projected figures for next year:

Variable cost per unit P30.00

Total fixed costs P210,000

What selling price per unit is needed to obtain a before-tax profit of P90,000 at a volume of 4,000 units?
A. 75.00
B. 52.50
C. 100.00
D. 105.00

16) For a profitable company, the amount by which sales can decline before losses occur is known as the
A. Sales volume variance C. Contribution margin
B. Margin of error D. Margin of safety

17) Margin of Safety

A. Is the amount of actual or expected sales which can still be decreased without resulting into a loss.
B. May be expressed in terms of pesos or in terms of a per unit figures.
C. May be increased by increasing either the expected sales or break even sales.
D. Shows how much sales volume can be reduced without sustaining losses.

18) For its most recent fiscal year, Corn Company reported that its contribution margin was equal to 40 percent of sales
and that its net income amounted to 10 percent of sales. If its fixed cost for the year were P60,000, how much was
the margin of safety?
A. 150,000 B. 200,000 C. 600,000 D. 50,000

19) Black Corporation breakeven point was P780,000. Variable expenses averaged 60% of sales, and the margin of
safety was P130,000. What was Black’s contribution margin?
A. 364,000 B. 546,000 C. 910,000 D. 1,300,000

20) Worthy Company has sales of P200,000, a contribution margin of 20% and a margin of safety of P80,000. What is
Worthy’s fixed cost?
A. 16,000
B. 24,000
C. 80,000
D. 96,000

21) The following information pertains to Clove Company for the year ending December 31, 2021:

Budgeted sales P 1,000,000

Breakeven sales 700,000
Budgeted contribution margin 600,000

Clove’s margin of safety is

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 A. 300,000
B. 400,000
C. 500,000
D. 800,000

22) The following information relates to Knight Company:

Sales revenue P5,000,000
Contribution margin 2,000,000
Net income 500,000

Knight's operating leverage factor is:

A. 0.25 B. 0.40 C. 2.50 D. 4.00

23) Kendall Company has sales of 1,000 units at P60 a unit. Variable expenses are 30% of the selling price. If total fixed
expenses are P30,000, the degree of operating leverage is:
A. 1.50
B. 5.00
C. 1.67
D. 3.50

24) Brown Company has sales of 2,000 units at P70 per unit. Variable expenses are 40% of the selling price. If total fixed
expenses are P44,000, the degree of operating leverage is:
A. 0.79
B. 1.40
C. 3.50
D. 2.10

25) The Oregano Watch Company manufactures a line of ladies’ watches which are sold through discount houses. Each
watch is sold for P1,500; the fixed costs are P3,600,000 for 30,000 watches or less; variable cost is P900 per watch.
What is Oregano’s degree of operating leverage at sales of 12,000 watches?
A. 2.0 times
B. 5.0 times
C. 0.5 times
D. 0.2 times

26) Chris Brown Company sells two products with the following per unit data:

Apple Orange
Selling price P 75 P 120
Variable cost 45 60
Contribution margin 30 60

Sales mix 3 units 2 units

If fixed costs are P630,000, the number of Apple and Orange units that Chris Brown must sell to break even is
A. 1,800 Apple and 1,200 Orange
B. 9,000 Apple and 6,000 Orange
C. 3,600 Apple and 2,400 Orange
D. 21,000 Apple and 14,000 Orange

27) Look At You is a company with P280,000 of fixed costs has the following data:

Product Sword Product Shield

Sales price per unit P5 P6
Variable cost per unit P3 P5

Assume three units of Product Sword are sold for each unit of Product Shield sold. How much will sales be in peso
of Product Shield at the breakeven point?
A. 200,000
B. 240,000

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 C. 280,000
D. 840,000

28) Wren Co. manufactures and sells two products with selling prices and variable costs as follows:

Product A Product B
Selling price P18.00 P22.00
Variable costs 12.00 14.00

Wren's total annual fixed costs are P38,400. Wren sells four units of A for every unit of B. If operating income last
year was P28,800, what was the number of units Wren sold?
A. 5,486
B. 6,000
C. 9,600
D. 10,500

29) Ace Manufacturing plans to produce two products, Gold and Silver, during the next year, with the following
characteristics:

Gold Silver
Selling price P 10 P 15
Variable cost per unit 8 10

Expected sales 20,000 units 5,000 units

Total projected fixed costs for the company are P30,000. Assume that the product mix would be the same at the
breakeven point as at the expected level of sales of both products. What is the projected number of units (rounded)
of the Product Gold to be sold at the breakeven point?
A. 2,308 units
B. 9,231 units
C. 11,538 units
D. 15,000 units

30) The following revenues and cost budget for two products, Sakit Company sells are made available:

Plastic Product Glass Product

Sales price P 50 P 75
Direct materials 10 15
Direct labor 15 25
Fixed overhead 15 20
Net income per unit 10 15

Budgeted unit sales 150,000 units 300,000 units

The budgeted unit sales equal the current unit demand, and total fixed overhead for the year is budgeted at
P4,875,000. Assume that the company plans to maintain the same proportional mix. In numerical calculations, the
company rounds to the nearest centavos and units.

The total number of units Sakit Company needs to produce and sell to breakeven is
A. 102,632 units
B. 153,947 units
C. 171,959 units
D. 418,455 units

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