3. Data for Pantok Corporation are shown below: Selling price......... Variable expenses... Contribution margin....... Per unit P75 45 P30 Percent of Sales 100% 60% 40% Fixed expenses are P75,000 per month and the company is selling 3,000 units per month. Required: a. The marketing manager believes that an P8,000 increase in the monthly advertising budget would increase monthly sales by P15,000. Should the advertising budget be increased? (show computations to prove your answer) b. Refer to the original data. Management is considering using higher-quality components that would increase the variable cost by P3 per unit. The marketing manager believes that the higher-quality product would increase sales by 15% per month. Should the higher-quality components be used? (show computations to prove your answer)

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 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...
icon
Related questions
Question
3. Data for Pantok Corporation are shown below:
Selling price........
Variable expenses..
Contribution margin...........
Per unit
P75
45
P30
Percent
of Sales
100%
60%
40%
Fixed expenses are P75,000 per month and the company is selling 3,000
units per month.
Required:
a. The marketing manager believes that an P8,000 increase in the monthly
advertising budget would increase monthly sales by P15,000. Should the
advertising budget be increased? (show computations to prove your answer)
b. Refer to the original data. Management is considering using higher-quality
components that would increase the variable cost by P3 per unit. The marketing
manager believes that the higher-quality product would increase sales by 15%
per month. Should the higher-quality components be used? (show
computations to prove your answer)
Transcribed Image Text:3. Data for Pantok Corporation are shown below: Selling price........ Variable expenses.. Contribution margin........... Per unit P75 45 P30 Percent of Sales 100% 60% 40% Fixed expenses are P75,000 per month and the company is selling 3,000 units per month. Required: a. The marketing manager believes that an P8,000 increase in the monthly advertising budget would increase monthly sales by P15,000. Should the advertising budget be increased? (show computations to prove your answer) b. Refer to the original data. Management is considering using higher-quality components that would increase the variable cost by P3 per unit. The marketing manager believes that the higher-quality product would increase sales by 15% per month. Should the higher-quality components be used? (show computations to prove your answer)
Expert Solution
steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Special order decisions
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning