Compute how much is the company fixed costs

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Reference no: EM132714042

Peter Senen Corp. produces and sells a single product. The selling price Is P25 and the variable costs is P15 per unit. The corporation's fixed costs is P100,000 per month. Average monthly sales is 11,000 units.

Problem 1. As a company's sales move farther from its break- even point, one would expect the degree of operating leverage to

a. increase

b. decrease

c. remained unchanged

d. vary in direct proportion to changes in the activity level.

Problem 2. If sales increase from P800,000 to P900,000, and if the degree of operating leverage is 5, one would expect profit to increase by

a. 62.5%

b. 12.5%

c. 5.0%

d. 2.5%

Problem 3. A company has an operating leverage factor of 4,. When its sales increased to P500,000, its profit before tax increased by 100%. Its variable cost ratio is 40%. How much is the company's fixed costs?

a. P100,000

b. P240,000

c. P180,000

d. P120,000

Reference no: EM132714042

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