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chapter-10

# chapter-10 - This Accounting Materials are brought to you...

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This Accounting Materials are brought to you by www.everything.freelahat.com CHAPTER 10 PRODUCT PRICING AND GROSS PROFIT VARIATION ANALYSIS [Problem 1] 1. Unit variable costs P30 Unit variable expense 3 Unit fixed overhead 5 Unit fixed expense 4 Unit costs and expenses 42 Mark-up (50%) 21 Unit sales price P63 2. USP P63 UVCE (P30 + P3) 33 UCM P30 Mark–up on CM = Non – Cost Items + Profit Non – Cost Based = P3 + P5 + P4 + P21 = 110% P30 [Problem 2] 1. USP = P2.50 x 150% = P3.75 2. USP = P3.50 x 140% = P4.90 3. USP = P3.00 x 145% = P4.35 4. USP = P5.90 x 135% = P7.965 5. USP = P3.50 x 135% = P4.725 6. USP = P2.20 x 160% = P3.52 [Problem 3] Unit variable production costs P3.00 Unit shipping costs 0.75 Incremental fixed costs (P40,000/10,000) 4.00 Minimum price/breakeven price P7.75 [Problem 4] Mark–up ratios on: 1. Absorption Costs = P3 + P2+ P30 = 102.94% P34 Unit Profit Margin = P6,000,000 x 15% = P30 30,000 units

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This Accounting Materials are brought to you by www.everything.freelahat.com 2. Variable Costs and Expenses = P4 + P2 + P30 P33 = 109.09% 3. Variable Production Costs = P4 + P3 + P2 + P30 = 130% P30 4. Full Costs = P30 = 76.92% P39 5. Materials Costs = P15 + P5 + P4 + P3 + P2 + P30 P20 = 295% [Problem 5] 1. Mark – up ratio = P12 + P3 + P6 = 58.33% P36 Unit fixed overhead (P600,000/50,000) P12 Unit fixed expenses (P150,000/50,000) 3 Unit profit margin [(P2,500,000 x 12%)/ 50,000] 6 2. Target unit sales price = P36 x 158.33% = P57 3. Mark-up ratio = P20 + P5 + P10 = 97.22% P36 UFxOH (P600,000/30,000) P20 UFx exp (P150,000/30,000) 5 UPM [(P2,500,000 x 12%)/ 30,000] 10 [Problem 6] 1. Technicians’ wages (P600,000/20,000 hrs) P30.00/hr Other repair costs (P200,000/20,000 hrs) 10.00/hr Ordering, handling, etc. 15.56/hr Standard time and material loading charge P 55.56/hr Ordering, handling,etc rate = P40 140% 100 - 20% - P40 140 = P15.56
This Accounting Materials are brought to you by www.everything.freelahat.com 2. Standard time and materials cost (P55.56 x 4 hrs) P 222.24 Parts 1,200.00 Amount to be billed P1,422.24 [Problem 7] Economy Standard Deluxe Sales P50,000 P80,000 P70,000 Var CGS (40% x costs) ( 12,000) ( 16,000) ( 20,000) Sales commissions ( 5,000) ( 8,000) ( 7,000) CM P33,000 P56,000 P43,000 CMR 66% 70% 61.43% Increase in CM – Deluxe (P43,000 x 40%) P17,200 - Standard (P56,000 x 80%) 44,800 Decrease in CM- Economy (P33,000x20%) (6,600) Net Increase in CM 55,400 Old net income 5,500 Desired net income (22,200) Maximum advertising expense P38,900 [Problem 8] Recommended sales price = ? Change in USP (25%) (10%) 10% 25% Change in sales due to Change in USP ( ∆ x 2003 Qty) P (750,000) P (285,000) P 225,000 P 525,000 Change in quantity ( ∆ Qty x P 15) 450,000 300,000 (300,000) (450,000) Change in advertising and promo expenditures (90,000) (50,000) (150,000) (250,000) Change in operating income P (390,000) P (35,000) P (225,000) P (175,000) The recommended unit sales price in 2003 is still P 15. All of the possible

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chapter-10 - This Accounting Materials are brought to you...

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