Reference no: EM132621060

Victoria Company sells a single product. The company's sales and expenses for a recent month follow:

                                                             Total                         Per Unit

Sales                                           P600,000                   P40

Less: variable expenses                   420,000                     28

Contribution margin                          P180,000                  P12

Fixed expense                                  150,000

Net operating income                          P 30,000

Required:

Problem 1. What is the monthly break-even point in units sold and in sales pesos?

Problem 2. Without resorting to computations, what is the total contribution margin at the break-even point?

Problem 3. How many units would have to be sold each month to earn a minimum target profit of P18,000? Use the contribution method. Verify your answer by preparing a contribution income statement at the target level of sales.

Problem 4. Refer to the original data. Compute the company's margin of safety in both peso and percentage terms.

Problem 5. What is the company's CM ratio?

Problem 6. If monthly sales increase by P80,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?