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1 Unit inventoriable costs ander boorption costing and anablece Chapter $/Cost-Volume Protit & Brest Eyen Arnlysis 231 project. 19-3. Jom Javier has come back from Papua New Guinea after working there for two years machine operator in a printing press. He is now Looking for a good investment project where he can invest nas savings from nie hard-earned subaty while he was working abroad. Aecordingly, he we able to accumulate P750,000 which he is willing to invest in my viabie At the moment, the as considering the offer of Ms. Sortis, prugt etres of Santa Printere, who wants to sell her printing press for P200,000. The lot price includes everything in her shop, including the remaining inventory of stocks, plates and even her existing customers. When Jom cequested some financial data, Ma. Sonis provided him with the tailowing: Sales P480,000 Cost of goods sold (1/3 is fixed) 120,000 Gross profit P360,000 Bperating expenses (1/4 is variable) 380,000 Inome (Loss) (P. 20.000) Jem is very optimistic that with his experience in the printing business which he got from his employer in PNG, he can revive the operations of Sonia Printers, eliminate its loss, and even earn 20% return on the required investment in the project, t.e., the purchase price of Ms. Sonia's business. To attain this, he is considering the following alternatives: 1. Engage in an extensive advertising campaign. This will require additional fixed operating costs of P20,000 but is expected to increase sales by 30%, without affecting the variable cost ratio. 2. Buy aditional machine at a cost of P50,000 to increase the present productive capacity. The new machine will cause an increase in fixed cost by P10,000 per period. The relationship of variable east to sales will not be affected by this new acquisition but the sales level is expected to go up by 40%. If this alternative were taken, his total investment in se project will be P250,000, composed of P200,000 purchase price and p50,000 cost of the machine. Before making his final decision, Jem wants to know first the following information: 1. Present break-even sales of Sonia Printers. 2. For alternative 1: 0. The new break-event sales 5. Projected recome Margin of safety Minimum required sales to recover all costs and earn the desired 20% profit based on the initial investoient of P200,000. 3. For alternative 2: The new break-even sales B. Prejected inope

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