Model Company manufactures a single electronic product called Lastik. Lastik sells for P900 per unit. In 2019, the following variable costs were incurred to produce each Lastik device. Direct labor P180 Direct materials P240 Factory overhead P105 Selling costs P75 Total variable costs P600 Model is subject to 40 percent income tax rate, and annual fixed costs are P6,600,000. Except for an operating loss incurred in the year of incorporation, the firm has been profitable over the last five years. In 2020, a significant change in Model's production technology caused a 10% increase in annual fixed costs and a 20% unit cost increase in the direct labor component as a result of higher skilled direct labor. However, this change permitted the replacement of a costly imported component with a local component. The effect was to reduce unit material costs by 25%. There has been no change in the Lastik selling price. What sales volume in units and amount should Model Company achieve in order to breakeven?

Model Company manufactures a single electronic product called Lastik. Lastik sells for P900 per unit. In 2019, the following variable costs were incurred to produce each Lastik device. Direct labor P180 Direct materials P240 Factory overhead P105 Selling costs P75 Total variable costs P600 Model is subject to 40 percent income tax rate, and annual fixed costs are P6,600,000. Except for an operating loss incurred in the year of incorporation, the firm has been profitable over the last five years. In 2020, a significant change in Model's production technology caused a 10% increase in annual fixed costs and a 20% unit cost increase in the direct labor component as a result of higher skilled direct labor. However, this change permitted the replacement of a costly imported component with a local component. The effect was to reduce unit material costs by 25%. There has been no change in the Lastik selling price. What sales volume in units and amount should Model Company achieve in order to breakeven?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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