Question

QUESTION 1 (30 marks) Read the following information and answer questions that follow. Boago is into a brick selling business. The business started operation in the year 2013, The selling price per brick is P10, variable costs per brick is P5 and fixed costs for the year is P100,000 Assuming that Boago sold 10,000 bricks, what is the profit or loss? a. (5 marks) If Boago is to sell 15,000 bricks what will be the profit or loss? b. (5 marks) How many bricks should Boago sell to break even? (3 marks) с. (2 marks) What is the Break Even Point (BEP) in sales? d. How much units should Boago sell if he is targeting to make P30,000 profit for the year (3 marks) е. 20142

Answer 1

(a) Profit/loss in selling 10,000 bricks :-

Sales (10,000 x P10)	P100,000
Less: variable cost (10,000 x P5)	(P50,000)
Less: Fixed cost	(P100,000)
Net Loss	(P50,000)

(b) Profit/loss in selling 15,000 bricks :-

Sales (15,000 x P10)	P150,000
Less: variable cost (15,000 x P5)	(P75,000)
Less: fixed cost	(P100,000)
Net loss	(P25,000)

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

= P100,000/P5 = 20,000 units

(d) Breakeven point in sales = Fixed cost/contribution margin ratio

= P100,000/(P5/P10) = $200,000

(e) Unit to sell if target profit is P30,000 :-

Required units = (fixed cost + required profit)/contribution per unit

= (P100,000 + P30,000)/P5 = 26,000 units