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The contribution margin of the Man's Store for the month of November

$2019$ is shown below:

Man's Store

Contribution Margin Income Statement

November $2019$

Sales Revenue

P$60,000$

Variable Expenses:

Fixed Expenses:

Selling

P$11,000$

Gen. and Administrative $,3,000$

Operating income

$====$

The company sells two of ties for every belt. The ties sell for P$7,$ with a variable

expense of $P4\mathrm{.}90$ per unit. The belts sell for $P6,$ with a variable unit cost of $P4\mathrm{.}20.$

Required:

Determine the Man's Store monthly breakeven point in the number of ties

and belts. Prove the correctness of your computation by preparing a

summary contribution margin income statement at breakeven. Show only

two categories of expenses: variable and fixed

Compute for the margin of safety in pesos.

Suppose that the company increases monthly sales by $15\%$ above the

$P60,000.$ Compute for the operating income.

Suppose the company expand the store and increases monthly fixed

expenses by $P4,800.$ Use the contribution margin approach to determine

the new breakeven sales in pesos.

$($

Feather Friends, Inc., distributes a high$-$quality wooden birdhouse that sells for $$20$ per unit. Variable expenses are

$$8$ per unit, and fixed expenses total $$180,000$ per year. Its operating results for last year were as follows:

Required:

Answer each question independently based on the original data:

What is the product's CM ratio?

Use the CM ratio to determine the break$-$even point in dollar sales.

Assume this year's unit sales and total sales increase by $3,750$ units and $$75,000,$ respectively. If the fixed

expenses do not change, how much will net operating income increase?

a$.$ What is the degree of operating leverage based on last year's sales?

b$.$ Assume the president expects this year's unit sales to increase by $20\%.$ Using the degree of operating leverage

from last year, what percentage increase in net operating income will the company realize this year?

The sales manager is convinced a $10\%$ reduction in the selling price, combined with a $$30,000$ increase in

advertising, would increase this year's unit sales by $25\%.$ If the sales manager is right, what would be this year's

net operating income if his ideas are implemented? Do you recommend implementing the sales manager's

suggestions? Why?

The president does not want to change the selling price. Instead, he wants to increase the sales commission by

$$1$ per unit. He thinks this move, combined with some increase in advertising, would increase this year's unit

sales by $25\%.$ How much could the president increase this year's advertising expense and still earn the same

$$60,000$ net operating income as last year?

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