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Sole Company manufactures running shoes. The selling price per pair of shoes (one unit) averages Php80...

Sole Company manufactures running shoes. The selling price per pair of shoes (one unit) averages Php80 and variable costs per pair are Php47.50. The sales volume of Php776,000 produces Php100,750 of net income before taxes.
​Required:
​a.​Compute total fixed costs.
​b.​Compute total variable costs.
​c.​Compute the breakeven point in units.
​d.​Compute the quantity of units above breakeven to reach targeted net income before taxes.

Solutions

Expert Solution

Selling Price per unit Php80

Variable cost per unit    Php47.5

Sales Php776,000

No. of units = Sales/ Selling price per unit

= Php776,000/80

= 9700 units

Contribution per unit = Selling price per unit - Variable cost per unit

= 80-47.5

= Php32.5

Total Contribution = Contribution per unit * No. of units

=  Php32.5 * 9700

= Php315,250

a. Net income before taxes = Contribution - Fixed cost

Total Fixed costs = Contribution - Net income before taxes

   = Php315,250 - Php100,750

= Php214,500

b. Total variable costs = Variable cost per unit * No. of units

= Php47.5 * 9700

= Php460,750

c. Breakeven point (in units) =   Fixed cost/ Contribution per unit

= Php214,500/ 32.5

= 6600 units

d. Quantity of units above breakeven to reach targeted net income before taxes = No.of units sold - Breakeven units

= 9700- 6600

= 3100 units

ekkarill92 answered 2 years ago
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