Mas.1416 Profit Planning and Cvp Analysis

7/25/2019 Mas.1416 Profit Planning and Cvp Analysis

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MAS.M 1416

PROFIT PLANNING AND CVP ANALYSIS

STRAIGHT PROBLEMS

1. BASIC CVP RELATIONSHIPS. Ariel Company produe! a produ" "#a" #a! "#e

$ollo%in& da"a per annum'

(ni" !ale! prie P)** per uni"

(ni" +aria,le o!"! P-* per uni"To"al $i/ed o!"! P0.* MILLION

(ni"! !old 0**** uni"!

Re2uired'

a. (ni" on"ri,u"ion mar&in on"ri,u"ion mar&in ra"io and +aria,le o!" ra"io.

,. Brea3e+en poin" in uni"! and in pe!o!.. Mar&in o$ !a$e"y in uni"! in pe!o! and mar&in o$ !a$e"y ra"io.

d. Amoun" o$ pro$i" u!in& "#e mar&in o$ !a$e"y analy!i!.

e. Ne" pro$i" ra"io.

$. I$ !ale! inrea!e ,y P)4**** #o% mu# %ould you e/pe" pro$i" "o inrea!e5&. 6e&ree o$ opera"in& le+era&e5

An!%er'a. (CM7 1)* CMR7 849 VCR749

,. BEP(74**** BEPP7 -*M

. MS(7-**** uni"! MSP7:M MSR7-:409d. -:*****

e. 1*9$. 1404***&. 8.4"ime!

-. SALES WITH PROFIT. ABC Corpora"ion pre!en"ly !ell! produ" SIMPLE LANG %i"#

"#e $ollo%in& rela"ed da"a'

(ni" on"ri,u"ion mar&in P:*

Varia,le o!" ra"io 049

To"al $i/ed o!"! P: millionTa/ ra"e )*9

Re2uired' T#e !ale! in uni"! and in pe!o! ,e i$'

A. Pro$i" ,e$ore "a/ i! P8 million. E. (ni" pro$i" mar&in ,e$ore "a/ i! P:.

B. Pro$i" a$"er "a/ i! P8 million. ;. (ni" pro$i" mar&in a$"er "a/ i! P


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I"em Sale! in uni"! Sale! in pe!o!

a. 1804** ))******

,. 1-4** 4-******

. 10 48888888

d. 1


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(ni" !ale! prie P-** P 4* P1-*

(ni" +aria,le o!"! 1** -*


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Re2uired'

a. Con"ri,u"ion mar&in ra"io.

,. Brea3e+en pe!o!.

. I$ !ale! are e/pe"ed "o inrea!e ,y -49 in -*11 %#a" i! "#e peren"a&e inrea!e in pro$i"5d. I$ "o"al $i/ed o!"! and e/pen!e! are e/pe"ed "o inrea!e ,y -49 %#a" %ould ,e "#e ne% pe!o

,rea3e+en poin" in -*115

Answer:

a. )*9 . *.8888

,. 14*M d. 8**M

.OPERATING LEVERAGE.;la!# 6i!3 Corpora"ion di!lo!e! "#e $ollo%in& da"a rela"i+e "o

i"! produ" in -*1*'

CM ?)**** uni"! / P4*@ P-******

To"al ;CE 14*****CMR )*9

Re2uired'

a. 6e&ree o$ opera"in& le+era&e.

,. #a" %ould ,e "#e peren"a&e inrea!e in EBIT i$ !ale! are e/pe"ed "o inrea!e ,y -*9 in

-*115

. #a" %ould ,e "#e peren"a&e #an&e in EBIT i$ !ale! are e/pe"ed "o inrea!e ,y 8*9 in-*115

An!%er'

a. ) "ime! ,. :*9 . 1-*9

0.* INDIFFERENCE POINT. Manila Company #a! deided "o in"rodue a ne% produ". T#e

ne% produ" an ,e manu$a"ured ,y ei"#er a $ullyau"oma"ed proe!! or a !emiau"oma"ed

proe!!. T#e manu$a"urin& proe!! %ill no" a$$e" "#e 2uali"y o$ "#e produ". T#e e!"ima"ed uni"

manu$a"urin& o!"! ,y "#e "%o me"#od! $ollo%'

;ully Semi

Au"oma"ed Au"oma"ed


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Ma"erial! P 4.** P .**

6ire" la,our .** 0.**

Varia,le $a"ory o+er#ead 8.** ).**

6ire"ly "raea,le inremen"al $i/ed o+er#ead i! e/pe"ed "o ,e P -)***** i$ "#e $ully

au"oma"ed i! #o!en. Alloa"ed $i/ed o!"! and e/pen!e! are P1 million and P- million $or $ull

au"oma"ed and !emiau"oma"ed re!pe"i+ely. T#e ompany! mar3e" Re!ear# 6epar"men" #a!

reommended an in"rodu"ory uni" !ale! prie o$ P)*. Re&ardle!! o$ "#e manu$a"urin& proe!!

#o!en "#e inremen"al mar3e"in& e/pen!e! are e!"ima"ed "o ,e 4***** per year plu! P- $or

ea# uni" !old.

Re2uired'

a. T#e e!"ima"ed ,rea3e+en poin" $or "#e ne% produ" in annual uni"! o$ !ale! i$ "#e ompany

u!e! "#e'

1. $ullyau"oma"ed manu$a"urin& proe!!.

-. !emiau"oma"ed manu$a"urin& proe!!.

,. T#e annual !ale! uni"! a" %#i# "#e #oie ,e"%een "#e "%o manu$a"urin& proe!!e! %ould

no" ma3e a di$$erene i$

1. "#e uni" !ale! prie i! P4* $or ei"#er proe!!=

- "#e uni" !ale! prie i! P44 $or $ully au"oma"ed proe!! and P4* $or !emi au"oma"ed proe!!

. T#e annual !ale! in pe!o! in %#i# "#e pro$i" $or ei"#er o$ "#e al"erna"i+e! %ould ,e "#e !ame.

An!%er'

a.1. 1***** uni"! ,.-. 180-4*

a.-. -*** uni"! . 1))****,.1. 8***

M(LTIPLE CHOICE D(ESTIONS

1. A" ,rea3e+en $i/ed o!" i! al%ay!

A. Le!! "#an on"ri,u"ion mar&in.

B. E2ual "o on"ri,u"ion mar&in.

C. More "#an +aria,le a!".

6. More "#an "#e on"ri,u"ion mar&in.


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-. Co!"+olumepro$i" analy!i! i! a 3ey $a"or in many dei!ion! inludin& #oie o$ produ"

line! priin& o$ produ"! mar3e"in& !"ra"e&y and u!e o$ produ"i+e $aili"ie!. A alula"ion

u!ed in a CVP analy!i! i! "#e ,rea3e+en poin". One "#e ,rea3e+en poin" #a! ,een rea#ed

opera"in& inome %ill inrea!e ,y "#e

A. Gro!! mar&in per uni" $or ea# addi"ional uni" !old.

B. Con"ri,u"ion mar&in per uni" $or ea# addi"ional uni" !old.

C. Varia,le o!" per uni" $or ea# addi"ional uni" !old.

6. Sale! prie per uni" $or ea# addi"ional uni" !old.

8. T#e "erm rele+an" ran&eF a! u!ed in o!" aoun"in& mean! "#e ran&e o+er %#i#

A. o!" rela"ion!#ip! are +alid

B. produ"ion may +ary

C. o!"! may $lu"ua"e

6. rele+an" o!"! are inurred

). Co!"+olumepro$i" analy!i! a!!ume! "#a" o+er "#e rele+an" ran&e "o"al.

A. Re+enue! are linear.

B. Varia,le o!"! are nonlinear.

C. Co!"! are un#an&ed.

6. ;i/ed o!"! are nonlinear.

4. Brea3e+en analy!i! a!!ume! lineari"y o+er "#e rele+an" ran&e %i"# re!pe" "o

To"al o!"! To"al re+enue

A. e! No

B. e! e!C. No e!

6. No No

. An a!!em,ly plan" aumula"e! i"! +aria,le and $i/ed manu$a"urin& o+er#ead o!"! in a

!in&le o!" pool %#i# i! "#en applied "o %or3inproe!! u!in& a !in&le applia"ion ,a!e. T#e

a!!em,ly plan" mana&emen" %an"! "o e!"ima"e "#e ma&ni"ude o$ "#e "o"al manu$a"urin&

o+er#ead o!"! $or di$$eren" +olume le+el! o$ "#e applia"ion a"i+i"y ,a!e u!in& a $le/i,le ,ud&e"

$ormula. I$ "#ere i! an inrea!e in "#e applia"ion a"i+i"y ,a!e "#a" i! %i"#in "#e rele+an" ran&e o$


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a"i+i"y $or "#e a!!em,ly plan" %#i# one o$ "#e $ollo%in& rela"ion!#ip re&ardin& +aria,le and

$i/ed o!"! i! orre"5

A. T#e +aria,le o!" per uni" i! on!"an" and "#e "o"al $i/ed o!"! derea!e.

B. T#e +aria,le o!" per uni" i! on!"an" and "#e "o"al $i/ed o!"! inrea!e.

C. T#e +aria,le o!" per uni" and "#e "o"al $i/ed o!"! remain on!"an".

6. T#e +aria,le o!" per uni" inrea!e! and "#e "o"al $i/ed o!"! remain on!"an".

0. One o$ "#e maor a!!ump"ion! limi"in& "#e relia,ili"y o$ ,rea3e+en analy!i! i! "#a"

A. E$$iieny and produ"i+i"y %ill on"inually inrea!e.

B. To"al +aria,le o!"! %ill remain un#an&ed o+er "#e rele+an" ran&e.

C. To"al $i/ed o!"! %ill remain un#an&ed o+er "#e rele+an" ran&e.

6. T#e o!" o$ produ"ion $a"or! +arie! %i"# #an&e! in "e#nolo&y. ?ma@

:. #en an or&ani>a"ion i! opera"in& a,o+e "#e ,rea3e+en poin" "#e de&ree or amoun" "#a"

re+enue! may deline ,e$ore lo!!e! are inurred i! "#e

A. Re!idual inome ra"e.

B. Mar&inal ra"e o$ re"urn

C Mar&in o$ !a$e"y.

6. Tar&e" ?#urdle@ ra"e o$ re"urn


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Sale! ommi!!ion ?on !ale!@ 49

;i/ed o!"! and e/pen!e!'

Manu$a"urin& o+er#ead P44


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Sale! 1**9

Co!" o$ !ale!

Varia,le 4*9

;i/ed 1*9 *9

Gro!! pro$i" )*9

Opera"in& e/pen!e

Varia,le -*9

;i/ed 149 849

Opera"in& inome 49

To"al !ale! amoun"ed "o P8.* million a" %#a" le+el i! ,rea3e+en !ale!5

A. P804**** C. P1:04***

B. P1:4**** 6. P-4*****

1). T#e $ollo%in& in$orma"ion per"ain! "o No+a Company! o!"+olumepro$i" rela"ion!#ip!'

Brea3e+en poin" in uni"! !old 1***

Varia,le o!"! per uni" P 4**

To"al $i/ed o!"! P14****

Ho% mu# %ill ,e on"ri,u"ed "o pro$i" ,e$ore inome "a/e! ,y "#e 1**1!"uni" !old5

A.P4* C. P14*B. P4** 6. P *

6a"a $or 2ue!"ion! 14 and 1 are a! $ollo%!'

Tropial S"u$$ Toy! manu$a"ure! and !ell! doll!. opera"in& re!ul"! $or "#e la!" 2uar"er'

S"u$$ "oy! !old 1


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B.P8.*4 6. P *.


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-*. #i# o$ "#e $ollo%in& %ill re!ul" in rai!in& "#e ,rea3e+en poin"5

A. A derea!e in "#e +aria,le o!" per uni".

B. An inrea!e in "#e !emi+aria,le o!" per uni"

C. An inrea!e in "#e on"ri,u"ion mar&in per uni".

6. A derea!e in inome "a/ ra"e!.

-1. T#e on"ri,u"ion mar&in ra"io al%ay! inrea!e! %#en "#e

A. Brea3e+en poin" inrea!e!.

B. Brea3e+en poin" derea!e!.

C. Varia,le o!"! a! a peren"a&e o$ ne" !ale! derea!e.

6. Varia,le o!"! a! a peren"a&e o$ ne" !ale! inrea!e.

--. In a pro$i" +olume &rap# "#e o!"+olumepro$i" rela"ion!#ip! are repre!en"ed. T#e +er"ial

a/i! i! "#e pro$i" in pe!o! and "#e #ori>on"al a/i! i! "#e +olume in uni"!. T#e dia&onal line i! "#e

on"ri,u"ion mar&in line. T#e poin" a" %#i# are on"ri,u"ion mar&in line in"er!e"! "#e >ero

pro$i" line i! "#e poin"'

A. A" %#i# "#e +olume le+el i! >ero.

B. A" %#i# "#e "o"al o!"! e2ual "#e "o"al !ale!.

C. A" %#i# !ale! inrea!e.

6. A" %#i# "o"al +aria,le o!"! e2ual "o"al !ale!.

-8. #en u!in& "#e &rap# me"#od i$ uni" ou"pu"! e/eed "#e ,rea3e+en poin"

A. E/pen!e! are e/"remely #i rela"i+e "o re+enue!.

B' T#ere i! lo!! ,eau!e "#e "o"al o!" line e/eed! "#e "o"al re+enue line.

C. To"al !ale! e/eed "o"al o!".

6. T#ere i! pro$i" !ine "#e "o"al o!" line e/eed! "#e "o"al re+enue line.

-). T#e mo!" impor"an" u!e o$ "#e o!"+olumepro$i" &rap# i! "o !#o%

A. T#e ,rea3e+en poin".

B. T#e o!"mar&in ra"io a" +ariou! le+el! o$ !ale a"i+i"y.

C. T#e rela"ion!#ip!amon& +olume o!" re+enue! o+er %ide ran&e! o$ a"i+i"y.

6. T#e de"ermina"ion o$ ro!! o+er poin".


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-4. Mar!"on En"erpri!e! !ell! "#ree #emial!' pe"rol !ep"ine and "ridol. Pe"rol i! "#e ompany!

mo!" pro$i"a,le produ"= "ridol i! "#e lea!" pro$i"a,le. #i# one o$ "#e $ollo%in& e+en"! %ill

de$ini"ely derea!e "#e $irm! o+erall ,rea3e+en poin" $or "#e upomin& aoun"in& period5

A .T#e in!"alla"ion o$ a ne% ompu"eron"rolled ma#inery and !u,!e2uen" layo$$ o$

a!!em,ly line %or3er!.

B. A derea!e in "ridol! !ellin& prie.

C. An inrea!e in an"iipa"ed !ale! o$ pe"rol rela"i+e "o !ale! o$ !ep"ine and "ridol.

6. An inrea!e in pe"rol! ra% ma"erial o!".

Sales with profit

Due!"ion! - "#rou -0 are ,a!ed on "#e $ollo%in& in$orma"ion' Tri,al Corpora"ion i!

de+elopin& a ne% produ" !ur&e pro"e"or! $or #i+ol"a&e ele"rial $lo%!. T#e o!"

in$orma"ion ,elo% rela"e! "o "#e produ".

6ire" ma"erial! P8.-46ire" la,our ).**

6i!"ri,u"ion *.04

T#e ompany %ill al!o ,e a,!or,in& P1-**** o$ addi"ional $i/ed o!"! a!!oia"ed %i"# "#i! ne%

produ". A orpora"e $i/ed #ar&e o$ P-**** urren"ly a,!or,ed ,y o"#er produ"! %ill ,e

alloa"ed "o "#e ne% produ".

-. I$ "#e !ellin& prie i! P1) per uni" "#e ,rea3e+en poin" in uni"! ?rounded "o "#e neare!"

#undred@ $or "#e $or !ur&e pro"e"or! i!'

A. :** uni"! C. 14*** uni"!

B. 1**** uni"! 6. -**** uni"!

-0. Ho% many !ur&e pro"e"or! ?rounded "o "#e neare!" #undred@ mu!" Tri,al !ell a" a !ellin&

prie o$ P1) per uni" "o &ain P8**** addi"ional opera"in& inome ,e$ore "a/e!5

A. 1*0** uni"! C. -4*** uni"

B. -**** uni"! 6. -48** uni"!

-:. Ho% many !ur&e pro"e"or! ?rounded "o "#e neare!" #undred@ mu!" Tri,al !ell a" a !ellin&prie o$ P1) per uni" "o inrea!e a$"er "a/ inome ,y P8****5 Tri,al! e$$e"i+e ra"e i! )*9.

A. 1*0** uni"! C. -4*** uni"!

B. -**** uni"! 6. -:8** uni"!


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-


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B. P)-**** 6. P4))***

8). C#emial! In. $ormula"e! and !ell! "#ree maor #emial!' C1 C- and C8. I" !ell! "o

indu!"rial u!er! %#o u!e and ,uy "#e!e #emial! in "#e $ollo%in& ra"io' "#e!e ?8@ mea!ure! o$ C1$or one ?1@ mea!ure o$ C8 "%o ?-@ o$ C- $or one?1@ mea!ure o$ C1. T#e ompany ma3e! "#e

$ollo%in& on"ri,u"ion mar&in per mea!ure'

C1 P8*

C- P)4

C8 P


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Produ" A P1*.** P).** 14***

Produ" B 14.** :.** -****

Produ" C 1:.**


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Normal plan" apai"y -***** uni"!

Sale! 14**** uni"!

Sellin& prie P-4 per uni"

Varia,le manu$a"urin& o!"! P 14 per uni"

;i/ed o!"!'

Manu$a"urin& P :*****

Sellin& and admini!"ra"ion P 0*****

An ad+er"i!in& a&eny laim! "#a" an a&&re!!i+e ad+er"i!in& ampai&n %ould ena,le Birney "oinrea!e i"! uni" !ale! ,y -*9. #a" i! "#e ma/imum amoun" "#a" Birney an pay $or ad+er"i!in&

and o,"ain an opera"in& pro$i" o$ P-*****.

A. P 1***** C. P8*****

B. P-***** 6. P44****

Due!"ion! )8 and )) are ,a!ed on "#e $ollo%in& in$orma"ion.

6elp#i Company #a! de+eloped a ne% proe" "#a" %ill ,e mar3e"ed $or "#e $ir!" "ime durin& "#ene/" $i!al year. Al"#ou "#e mar3e"in& 6epar"men" e!"ima"e! "#a" 84*** uni"! ould ,e !old a"

P8 per uni". 6elp#i mana&emen" #a! alloa"ed only enou manu$a"urin& apai"y "o produe a

ma/imum o$ -4*** uni"! o$ "#e ne% produ" annually. T#e $i/ed o!"! a!!oia"ed %i"# "#e ne%produ" are ,ud&e"ed a" P)4**** $or "#e year %#i# inlude! P**** $or depreia"ion on ne%

manu$a"urin& e2uipmen".

6a"a a!!oia"ed %i"# ea# uni" o$ produ" are pre!en"ed ,elo%. 6elp#i i! !u,e" "o a )*9 inome

"a/ ra"e.

Varia,le Co!"!

6ire" ma"erial P 0.**

6ire" la,or 8.4*

Manu$a"urin& o+er#ead ).**

To"al +aria,le manu$a"urin& o!" 1).4*

Sellin& prie 1.4*

To"al +aria,le o!" P1.**

)8. T#e ma/imum a$"er "a/ pro$i" "#a" an ,e earned ,y 6elp#i Company $rom !ale! o$ "#e ne%

produ" durin& "#e ne/" $i!al year i!

A. P 8****

B. P 4****

C. P11****

6. P *** ?ma@


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)). 6elp#i Company! mana&emen" #a! !"ipula"ed "#a" i" %ill no" appro+e "#e on"inued

manu$a"ure o$ "#e ne% produ" a$"er "#e ne/" $i!al year unle!! "#e a$"er"a/ pro$i" i! a" lea!"

P04*** "#e $i!al year. T#e uni" !ellin& prie "o a#ie+e "#i! "ar&e" pro$i" mu!" ,e a" lea!"

A. P80.** C. P8).*

B. P8.* 6. P8


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A. P 0.4* C. P8*.**

B. P1.** 6. P-.4*

)


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Per uni"

Re+enue! ?14**** uni"! a" P8*@ P)4***** P8*

Varia,le o!"!'

6ire" ma"erial! 1*4**** P 0

6ire" la,our 14***** 1*

M$&. o+er#ead 8***** -

Sellin& J mar3e"in& 8**.*** -

?814****@ -1

Con"ri,u"ion mar&in P184**** P

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Mas.1416 Profit Planning and Cvp Analysis

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