Reference no: EM133093536
Question - Bublik Canvas Company makes canvas window awnings. You have been asked to predict the potential effects of some proposed company changes. The following information is available:
Variable cost per unit
Direct material P18.40
Direct labor 13.00
Production overhead 8.60
Selling expenses 4.60
Administrative expenses 3.00
Annual fixed cost
Production overhead P1,200,000
Selling 972,000
Administrative 480,000
The selling price is P94.00 per unit, and expected sales volume for the current year is 150,000 units. Following are some changes proposed by various members of the company.
1. Engineers suggest that adding color accents to each unit at a cost of P14.40 would increase product sales by 20 percent.
2. The sales manager suggests that a P520,000 increase in advertising will increase sales by 15 percent.
3. The sales force believes that lowering the price by 5 percent will increase demand in units by 10 percent.
Required - Based on the information above, answer the following:
1. What is the current margin of safety in pesos?
2. Which proposal is most acceptable for the company?
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