Reference no: EM132541144
Davao Company sells its only product at P30 per unit. Variable costs are P22 per unit and fixed costs are P100,000 per month.
Required: Treat each question independently from the others.
Question 1. If Davao can sell 15,000 units in a particular month, what will be its income?
Question 2. What is the break-even point in units?
Question 3. What is the break-even point in pesos?
Question 4. What unit sales are required to earn P50,000 for the month?
Question 5. What sales, in pesos, are required to earn P50,000 for the month?
Question 6. Suppose Davao reduces its selling price to P28 because competitors are charging that amount. What is its new break-even point (a) in units and (b) in pesos?
Question 7. Suppose that fixed costs are expected to increase by P10,000 per month and price remains at P30. What is the new break-even point (a) in units and (b) in pesos?
Question 8. Suppose Davao is currently selling 10,000 units per month. The marketing manager believes that sales would increase if advertising were increased by P5,000. How much would sales have to increase, in units, to give Davao the same income or loss that it is currently earning? (Although, you know how many units are now being sold, you do not need this fact to solve the problem.)
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