Reference no: EM132976661

Question - Dackers Company, a wholesaler of jeans, had the following income statement for last year:

Sales (40,000 pairs at P35) P1,400,000

Cost of sales 800,000

Gross margin P 600,000

Selling expenses P350,000

Administrative expenses 190,000 540,000

Income P 60,000

Mr. Dackers informs you that the only variables costs are the cost of sales and P2 per unit selling costs. All administrative expenses are fixed. In planning for the coming year, Mr. Dackers expects his selling price to remain constant, with unit volume increasing by 20%. He also forecasts the following changes in costs and is concerned about how they will affect profitability.

Variable costs:

Cost of goods sold up P1.50 per unit

Selling costs up to P0.10 per unit

Fixed costs:

Selling costs up to P40,000

Administrative costs up to P30,000

REQUIRED -

1. Compute the expected income for the coming year, assuming that all forecasts are met.

2. Determine the number of units that Dackers will have to sell in the coming year to earn the same profit as the current year.

3. Mr. Dackers is disturbed at the results of requirements 1 and 2. He asks you by how much he must raise his selling price to earn P60,000 selling 48,000 units.