PROBLEM 7. Mcoy Company has, for the coming year, budgeted sales of P3,200,000 with contribution margin of 60 percent and fixed costs of P1,200,000. The company's only one product line sells for P80. The company is subject to 40 percent tax bracket. Requirements: 1. If the company determined that a particular advertising campaign had a high probability of increasing sales by 8,000 units, how much could it pay for such a campaign without reducing its planned annual profits? 2. A plan includes an increase in advertising cost of P96,000. What is the minimum increase in peso sales to compensate for the increase in advertising cost? 3. If the company wants its before-tax profit to increase by 10 percent on its expected sales volume of 40,000 units, what selling price must Mcoy use?

PROBLEM 7. Mcoy Company has, for the coming year, budgeted sales of P3,200,000 with contribution margin of 60 percent and fixed costs of P1,200,000. The company's only one product line sells for P80. The company is subject to 40 percent tax bracket. Requirements: 1. If the company determined that a particular advertising campaign had a high probability of increasing sales by 8,000 units, how much could it pay for such a campaign without reducing its planned annual profits? 2. A plan includes an increase in advertising cost of P96,000. What is the minimum increase in peso sales to compensate for the increase in advertising cost? 3. If the company wants its before-tax profit to increase by 10 percent on its expected sales volume of 40,000 units, what selling price must Mcoy use?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 40P

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