Chapter 4 – Cost Accounting

Problem 1.

1. Variable cost ratio: P360,000 / P600,000 = 60%

2. Contribution margin ratio: (P600,000 – P360,000) / P600,000 = 40%
3. Break-even-point in units P192,000 / P24 = 8,000 units
4. Break-even point in sales P192,000 / 40% P480,000

Problem 2.

1. Break-even-point in units = P148,500 / P300 = 495 units

2. Break-even-point in pesos = 495 x P1,000 = P495,000
Or = P148,500 / 30% = P495,000
3. Contribution margin statement:
At Break even units of 495 Sales P495,000
Variable cost (495 x P700) (346,500)
Contribution margin P148,500
Fixed cost (148,500)
Net income P 0

At 10,000 units Sales P10,000,000

Variable cost (10,000 x P700) (7,000,000)
Contribution margin P 3,000,000
Fixed cost ( 148,500)
Net income P 2,851,500
Check on units sold for desired profit 2,851,500
(P148,500 + P2,851,500) / P300 10,000 units

Problem 3

1. Contribution margin per unit P1,050 - P630) = P420 per unit

2. Contribution margin ratio P420 / P1,050 = 40%
3. Break-even-point in units P630,000 / P420,000 = 1,500 units
Pesos P630,000 / 40% = P1,575,000
4. Sales in units at a desired net profit of P94,500 = (P630,000 + P94,500)/P420 = 1,725 units
Check Sales (P1,725 x P1,050) P 1,811,250
Variable cost (1,725 units x P630) ( 1,086,750)
Contribution margin P 724,500
Total fixed cost ( 630,000)
Net income P 94,500
Problem 4

1. X100 X150 C800

Sales price P8,800 P14,800 P24,000
Variable cost 7,600 12,000 20,000
Contribution margin P1,200 P 2,800 P 4,000
Sales mix 30% 50% 20%
Weighted average P 360 P 1,400 P 800 = P2,560

BEP in Units P1,080000 / P2,560 421.875 units

Allocation of break-even-units to sales mix

X100 : 421.875 x 30% = 126.5625
X950: 421.875 x 50% = 210.9375
C800: 421.875 x 20% = 84.3750 421.875 units

BEP in Pesos X100 X950 C800

Allocated units 126.5625 210.9375 84.3750
Times unit sales price P8,800 P14,800 P24,000
Peso sales P1,113,750 P3,121,875 P2,025,000 P6,259,920
Variable cost 961,875 2,531,250 1,687,500 5,180,625
Contribution margin P151,875 P 590,625 P 337,500 P1,080,000
Fixed cost (151,875) (590,625) ( 137,500) P1,080,000

2. BEP in units + (P1,080 + P1,000) / P2,560 = 812.5 units

Allocated to X100: 812.5 x 30% 243.75 x 8,800 P2,145,000
X950 812.5 x 50% 406.25 x 14,800 6,012,500
C800 812.5 x 20% 162.50 x 24,000 3,900,000 P12,057,500
Variable cost
X100 243.75 x 7,600 P1,852,500
X950 406.25 x 12,000 4,875,000
C800 162.50 x 20,000 3,250,000 9,977,500
Contribution margin P 2,080.000
Total fixed costs 1,080,000
Net income P 1,000,000

Problem 5

Contribution margin per unit = P100 – (25 – 15 – 20) P40 per unit

Contribution ratio per unit = P40 / P100 40%

1. A. BEP in units = P20,400 / P40 510 units

 b. BEP in pesos = P20,400 / 40% P51,000

2. Contribution margin (40 x 1,400 units) P 56,000

Fixed costs (20,400)
Net income P 35,600

3. Units sold at desired profit of P25,000 = P20,400 + P25,000/P40 1,135 units

4. Total peso sales is (20,480 + 40,000)/ 40% = P151,000 / 15,000 P100.67 per unit

Problem 6

1. BEP in units P626,400/ P8 78,300 units

2. BEP in pesos P626,400/40% P1,566,000
3. Contribution margin ratio P8/P20 40%
4. Current sales - BE sales = Margin of safety = P2,480,000 – P1,566,000 = P914,000
5. Margin or safety ratio = P914,000 / P2,480,000 36.85%

Problem 7

1. BEP in pesos P100,000 / 20% P500,000

2. Margin of safety = P750,000 - P500,000 P250,000
3. Margin of safety ratio = P250,000 / P750,000 33.33%
4. Degree of operating leverage = CM / Net income = P150,000/P50,000 3 times
5. DOL 3 x 30% = 90% increase income, i.e. P50,000 x 1.9 P95,000

MULTIPLE CHOICE – THEORETICAL

For items 1 to 4 below, please change unit selling price from P40 to P20. Thanks.

1. B 6. C Note: For item 5, please change opening sentence to:

2. B 7. C A company’s break-even-point would be increased by the
3. C 8. D following statements, EXCEPT;
4. A 9. B
5. D 10. A

MULTIPLE CHOICE – COMPUTATIONAL

1. A 6. C 11. P33.33 16. D

2. D 7. P156.67 12. B 17. C
3. D 8. D 13. B 18. P0.50
4. D 9. P67,500 14. D 19. A
5. B 10. P40 15. C 20. A