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X A Expected total contribution margin

Present total contribution
₱ 43,200
40,000

M P
Increase ₱3,200

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X A Fixed cost = ₱20,000
Variable cost = ₱30/unit
Sales = 1,000 units at ₱50/unit

M P
The company wants to increase their monthly income.
So based on past data, they want to consider an
increase in variable cost by ₱10/unit and by doing so,
their sales would increase by 200 units. Should the
changes be made?

L E
 E
Expected total contribution
Present total contribution
Incremental contribution margin
₱ 48,000
40,000
8,000
X A
M P
Incremental advertising expense 15,000
Reduction in net operating income ₱ (7,000)

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X A
Fixed cost = ₱15,000
Variable cost = ₱30/unit
Sales = 1,000 units at ₱50/unit

To increase the company’s monthly income, the

M P
manager is considering to reduce the selling price
by ₱10/unit and increase the advertising budget by
₱15,000/month. The manager predicts that if these
changes are done, it would increase sales to 2,500
units/month. Should the changes be made?

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 Present 1,000 units per month Expected 2,500 units per month
Total Per unit Total Per unit
Sales ₱50,000 ₱50 ₱100,000 ₱40
Variable Expenses 30,000 30 75,000 30
Contribution Margin 20,000 ₱20 25,000 10
Fixed Expenses 15,000 30,000
Net operating income (loss) ₱5,000 ₱(5,000)
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X A Expected total contribution
Present total contribution
Incremental contribution margin
₱ 39,100
40,000
(900)

M P
Incremental advertising expense 6,000
Reduction in net operating income ₱ 5,100

L E
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X A Fixed cost = ₱20,000
Variable cost = ₱30/unit
Sales = 1,000 units at ₱50/unit

M P
The managerial accountant feels that by decreasing
the variable cost by ₱ 10/unit and increasing the
fixed cost by ₱ 5,000, their sales would increase by
500 units. Is the manegerial accountant's decision is
right?

L E
 Present 1,000 units per month Expected 1,500 units per month
Total Per unit Total Per unit
Sales ₱50,000 ₱50 ₱75,000 ₱50
Variable Expenses 30,000 30 30,000 20
Contribution Margin 20,000 ₱20 45,000 40
Fixed Expenses 20,000 25,000
Net operating income (loss) ₱ 0 ₱20,000