JOSE RIZAL UNIVERSITY
BRIEF EXERCISES - CVP
1. The following information is for Wildwood Corporation:
Total fixed costs Php500,000
Unit variable costs Php50.95
Unit selling price Php68.50
Required:
a. Compute the contribution margin per unit.
b. Compute the contribution-margin ratio.
c. Compute the break-even point in units.
d. Compute the break-even volume in dollars.
2. For the current year ending January 31, Bell Company expects fixed costs of Php178,500
and a unit variable cost of Php41.50. For the coming year, a new wage contract will
increase the unit variable cost to Php45. The selling price of Php50 per unit is expected to
remain the same.
(a) Compute the break-even sales (units) and BES Pesos for the current year.
(b) Compute the anticipated break-even sales (units) for the coming year,
assuming the new wage contract is signed.
3. Currently, the unit selling price is Php30, the variable cost, Php14, and the total fixed costs,
Php96,000. A proposal is being evaluated to increase the selling price to Php34.
(a) Compute the current break-even sales (units) BES in Pesos.
(b) Compute the anticipated break-even sales (units), assuming that the unit selling
price is increased and all costs remain constant.
4. Explosion Company produces fireworks and has provided the following information:
Total fixed costs Php100,000
Unit variable costs Php6
Planned unit sales 30,000
The break-even point is 25,000 units.
Required:
a. Compute the selling price per unit.
b. Compute the contribution-margin ratio.
c. Compute the break-even volume in Pesos
d. Compute the margin of safety.
5. The Eastman Family Restaurant is open 24 hours per day serving breakfast, lunch, and
dinner. Fixed costs are Php24,000 per month. Variable costs are estimated at Php9.60 per
meal. The average total bill (excluding tax and tip) is Php12 per customer.
Required:
a. Compute the number of meals that must be served if the Eastman Family
Restaurant wishes to earn a profit before taxes of Php6,000.
b. Compute the break-even point in meals.
c. Compute the break-even volume in dollars.
d. Assume that fixed costs increase to Php30,000. How many additional meals
must be served if the Eastman Family Restaurant wishes to earn the same
before-tax profit?
6. Sole Company manufactures running shoes. The selling price per pair of shoes (one unit)
averages Php80 and variable costs per pair are Php47.50. The sales volume of Php776,000
produces Php100,750 of net income before taxes.
Required:
a. Compute total fixed costs.
b. Compute total variable costs.
c. Compute the break-even point in units.
d. Compute the quantity of units above breakeven to reach targeted net income before
taxes.
7. For the current year ending April 30, Phillip Company expects fixed costs of Php70,000, a
unit variable cost of Php60, and a unit selling price of Php95.
(a) Compute the anticipated break-even sales (units).
(b) Compute the sales (units) required to realize an operating profit of
Php8,000.
8. For the coming year, Swain Company estimates fixed costs at Php90,000, the unit variable
cost at Php20, and the unit selling price at Php80. Determine (a) the break-even point in
units of sales, (b) the unit sales required to realize operating income of Php150,000, and (c)
the probable operating income if sales total Php500,000.
9. For the past year, Chandler Company had fixed costs of Php70,000, unit variable costs of
Php32, and a unit selling price of Php40. For the coming year, no changes are expected in
revenues and costs, except that property taxes are expected to increase by Php10,000.
Determine the break-even sales (units) for (a) the past year and (b) the coming year.
10. For the past year, Holcomb Company had fixed costs of Php6,552,000, a unit variable cost of
Php444, and a unit selling price of Php600. For the coming year, no changes are expected in
revenues and costs, except that a new wage contract will increase variable costs by Php6
per unit. Determine the break-even sales (units) for (a) the past year and (b) the coming
year.
11. A company with a break-even point at Php900,000 in sales revenue and had fixed costs of
Php225,000. When actual sales were Php1,000,000 variable costs were Php750,000.
Determine (a) the margin of safety expressed in dollars, (b) the margin of safety expressed
as a percentage of sales, (c) the contribution margin ratio, and (d) the operating income.
12. A company has a margin of safety of 25%, a contribution margin ratio of 30%, and sales of
Php1,000,000.
(a) What was the break-even point?
(b) What was the operating income?
(c) If neither the relationship between variable costs and sales nor the amount
of fixed costs is expected to change in the next year, how much additional
operating income can be earned by increasing sales by Php110,000?
