Question

In: Accounting

In 2013, Granny Co. has sales of P800,000, flexible (variable) costs of P200,000, and Capaciity-related (fixed)...

In 2013, Granny Co. has sales of P800,000, flexible (variable) costs of P200,000, and Capaciity-related (fixed) costs of P300,000. In 2014, Granny Co. expects annual property taxes to decrease by P15,000.
a. Calculate operating income and the breakeven point for 2013.
b. Calculate the breakeven point for 2014.

Solutions

Expert Solution

  • All working forms part of the answer
  • Requirement ‘a’

--Operating Income for 2013

A

Sales

P          800,000.00

B

Variable cost

P          200,000.00

C = A - B

Contribution margin

P          600,000.00

D

Fixed Cost

P          300,000.00

E = C - D

Operating Income

P          300,000.00

--2013’s Break Even point

A

Contribution margin

P          600,000.00

B

Sales

P          800,000.00

C = (A/B) x 100

CM Ratio

75%

D

Fixed Cost

P          300,000.00

E = D/C

Break Even point

P          400,000.00

  • Requirement ‘b’

A = 300000 - 15000

2014's Fixed Cost

P          285,000.00

B

CM Ratio

75%

C = A/B

2014's Break Even point

P          380,000.00


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