MANAGEMENT SCIENCEPRACTICE SETTOPIC: BREAKEVEN AND SENSITIVITY ANALYSISPROBLEM 1.ABC Manufacturing is a producer of a local product used in house deaning, called Agent C. The production manager isrequired to present a production report for the month August, however he got no idea on what information he neededfor the report, and what analysis could be made to help the top management on their decision-making.The production manager sought your expertise on the subject matter and gave to you the following information:Sales (in Pesos)4,957,875.0022,500.00Sales VolumeVarlable Costs:Cost of Direct Raw Materials895,000.00530,000.00124,200.00Cost of Direct LaborCost of Packaging MaterialsFixed Costs:Monthly DepreciationMonthly Rent of WarehouseFixed Monthly Allowance for ElectricityOther Fixed Manufacturing Overhead650,000.00100,000.00675,000.00146,700.00Required:BREAKEVEN ANALYSIS1. Compute the selling price per unit of Agent C.2. Compute the variable cost per unit of Agent C.3. Compute the variable cost rate of Agent C.4. Compute the contribution margin per unit of Agent C.5. Compute the current contribution margin rate of Agent C.6. Compute the total fixed costs in producing Agent C.7. How many units must ABC Manufacturing produce to breakeven?8. How many units must ABC Manufacturing produce to achieve a desired profit of P 2,000,000?9. From the current sales volume units, how many more units must ABC Manufacturing produce and sell to reach thedesired profit of P 2,000,000?10. From the current breakeven sales, how many more units must ABC produce and sell to achieve a profit of P 1,900,000?11. How much will ABC ean if it produces and sells 10,000 units of Agent C?SENSITIVITY ANALYSIS12. If the selling price per unit is increased by 20% of its current price while the variable cost per unit is also increasedby 30%, compute the following:a. Compute the new selling price per unit.b. Compute the new variable cost per unit.C. Compute the new contribution margin rate.d. How many units must ABC produce and sell to avoid losing money?e. At what n" unit ABC will start earning profit?f. With this proposed changes, how many units more or units less that ABC must produce to reach breakevencompared to the current breakeven?9. How many units of Agent C must be produced and sold to earn a profit P 2,000,000?h. With these changes, how many units more or units less should ABC produce to earn a profit of P 2,000,000, ascompared to the units determined using the current price and variable costs?13. If the fixed cost is increased by P 500,000 per month and 20% income tax is imposed on the net income, computethe following:a. How many units must ABC produce and sell to breakeven?b. With this proposed changes, how many units more or units less that ABC must produce to reach breakevencompared to the current breakeven?C. How many units must ABC produce and sell to achieve a profit of P 2,000,000?d. Assuming the above changes, what price per unit must be charged if the current breakeven units must bemaintained?e. Using the information in letter (d), what will be effect to the contribution margin rate?

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Answered: TOPIC: BREAKEVEN AND SENSITIVITY…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter18: Activity-based Costing

Section: Chapter Questions

Problem 3TIF: Communication The controller of New Wave Sounds Inc. prepared the following product profitability...

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D: Measures of Internal Business Process PerformanceDataSpan, Inc., automated its plant at the start of the current year and installed a flexiblemanufacturing system. The company is also evaluating its suppliers and moving toward LeanProduction. Many adjustment problems have been encountered, including problems relating toperformance measurement. After much study, the company has decided to use the performancemeasures below, and it has gathered data relating to these measures for the first four months ofoperations.Month1 2 3 4Throughput time (days) ? ? ? ?Delivery cycle time (days) ? ? ? ?Manufacturing cycle efficiency (MCE) ? ? ? ?Percentage of on-time deliveries 91% 86% 82% 78%Total sales (units) 3460 3312 3143 3025Management has asked for your help in computing throughput time, delivery cycle time, and MCE.The following average times have been logged over the last four months: Average per Month (in days)1 2 3 4Move time per unit 0.7 0.5 0.6 0.6Process time per unit 2.8 2.7 2.6…
Measures of Internal Business Process Performance DataSpan. Inc., automated its plant at the start of the current year and installed a flexible manufacturing system. The company is also evaluating its suppliers and moving toward Lean Production. Many adjustment problems have been encountered, including problems relating to performance measurement. After much study, the company has decided to use the performance measures below, and it has gathered data relating to these measures for the first four months of operations. Management has asked for your help in computing throughput time, delivery cycle time, and MCE. The following average times have been logged over the last four months: Required: 1. For each month, compute the following: a. The throughput time. b. The delivery cycle time. c. The manufacturing cycle efficiency (MCE). 2. Evaluate the company’s performance over the last four months. 3. Refer to the move lime, process time, and so forth, given above for month 4. a. Assume that…
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