Ds Jo Trading, maker of high-quality flashlights, has experienced steady growth over

the last 6 years. However, increased competition has led Mr. Jo, the president, to
believe that aggressive campaign is needed next year to maintain the companys
present growth. The companys accountant has presented Mr. Jo with the following
data from last year 2012, for use in preparing this years advertising campaign.
Cost Schedules
Variable costs:
Direct labor per flashlight
P8.00
Direct materials
4.00
Variable overhead
3.00
Variable cost per flashlight
P15.00
Fixed costs
Manufacturing
P25.00
Selling
40.00
Administrative
70.00
Total fixed costs
P135.00
Selling price per flashlight
P25.00
Expected sales, 2013 (20,000 flashlights)
P500,000
Mr. Jo has set the sales target for the year 2013 at a level of P550,000
(22,000 flashlights)
Instructions
a. What is the projected operating income for 2013?
b. What is the contribution margin per unit for 2002?
c. What is the break-even point in units for 2013?
d. Mr. Jo believes that to attain the sales target in the year 2003, the
company must incur an additional selling expenses of P10,000 for
advertising for 2013, with all other costs remaining constant. What will be
the break-even point in peso sales for 2013 if the company spends the
additional P10,000.
e. If the company spends the additional P10,000 for advertising for 2013,
what is the sales level in dollars required to equal 2012 operating income?
----------------------------------------------------------------------------------------------------------------------------------------AA Abro Manufacturings sales slumped badly in 2012. Fpr the first time in its
history, it operated at a loss. The companys income statement showed the
following results from selling 600,000 units of product. Net sales P2,400,000; total
costs and expenses P2,600,000; net loss P200,000. Costs and expenses consisted of
the following:
Total
Variable
Fixed
Cost of goods sold
P2,100,000 P1,440,000
P660,000
Selling expenses
300,000
72,000
228,000
Administrative expenses
200,000
48,000
152,000
P2,600,000 P1,560,000
P1,040,000
Management is considering the following independent alternatives for 2013.
1. Increase unit selling price 25% with no change in costs, expenses and sales
volume.

2. Change the compensation of sales persons from fixed annual salaries totaling
P210,000 to total salaries of P70,000 plus a 4% commission on net sales.
3. Purchase new automated equipment that will change the proportion between
variable and fixed cost of goods sold to 60% variable and 40% fixed.