Reference no: EM132978465
Problem 1 - Multi-Product - Cavite Corporation currently produces and sells three products, Alpha, Beta, and Charlie. The current sales mix is as follows: 2 Alpha for 1 Beta and 1 Beta is to 1 Charlie. Alpha's selling price and variable cost is P10 and P6 respectively while Beta's selling price is P20 and its contribution margin per unit amounted to P5. Charlie's Contribution Margin ratio is 30%. The company's total fixed cost is P165,000 and the total break-even point in units is 30,000.
Required -
1. What was the weighted average contribution margin per unit?
2. What is Charlie's selling price?
3. If Alpha's current unit sales are 20,000 units, how much was the company' current operating income?
4. If the company's target profit is P 55,000, how much would be the volume of Beta?
Problem 2 - Changes in Structure - Match Company reports the following results for the month of November:
Units sold 10,000
Sales P600,000
Variable costs 420,000
Contribution margin 180,000
Fixed costs 110,000
Net income P70,000
Management is considering the following independent courses of action to increase net income.
1. Increase selling price by 6% with no change in units sold.
2. Reduce variable costs to 65% of sales.
3. Reduce fixed costs by P 20,000
4. Reduce fixed costs by P 10,000 while increasing variable costs to P4.50 per unit.
5. Reduce variable cost by 10% while increasing fixed costs to P140,000.
Required - Determine the net income to be earned for each of the given alternative course of action.