Answer :
Certainly! Let's work through the steps to determine how many units of Tams need to be sold next year for the company to be as well off as discontinuing the Tams product, which results in a P120,000 increase in the contribution margin of other product lines.
### Steps and Calculations:
1. Given Information:
- Discontinuing the Tams product results in a P120,000 increase in the contribution margin.
- We are asked to find the number of Tams units that need to be sold to match this increase in contribution margin.
2. Determine the Contribution Margin per Unit of Tams:
- The increase in contribution margin from other product lines is P120,000.
- To match this increase purely from sales of Tams, each Tam sold needs to contribute a certain amount to the contribution margin.
- Let’s denote the contribution margin per unit of Tams as \( CM_{unit} \).
3. Calculate the Contribution Margin per Unit of Tams:
- From the data, we have an increase in contribution margin of P120,000.
- This increase corresponds to sales of 6,000 units of Tams.
Therefore, the contribution margin per unit of Tams is calculated as:
[tex]\[ CM_{unit} = \frac{120,000 \, \text{PHP}}{6,000 \, \text{units}} = 20 \, \text{PHP/unit} \][/tex]
4. Determine the Number of Tams Needing to be Sold:
- Now, we need to find out how many units of Tams need to be sold to match the P120,000 increase in contribution margin.
Using \( CM_{unit} \) of 20 PHP/unit:
[tex]\[ \text{Number of Tams needed} = \frac{120,000 \, \text{PHP}}{20 \, \text{PHP/unit}} = 6,000 \, \text{units} \][/tex]
### Conclusion:
The company would need to sell 6,000 units of Tams next year for the contribution margin from Tams sales to be equal to the P120,000 increase in contribution margin that would result from discontinuing the Tams product.
So, the correct answer is:
B. 6,000 units
### Steps and Calculations:
1. Given Information:
- Discontinuing the Tams product results in a P120,000 increase in the contribution margin.
- We are asked to find the number of Tams units that need to be sold to match this increase in contribution margin.
2. Determine the Contribution Margin per Unit of Tams:
- The increase in contribution margin from other product lines is P120,000.
- To match this increase purely from sales of Tams, each Tam sold needs to contribute a certain amount to the contribution margin.
- Let’s denote the contribution margin per unit of Tams as \( CM_{unit} \).
3. Calculate the Contribution Margin per Unit of Tams:
- From the data, we have an increase in contribution margin of P120,000.
- This increase corresponds to sales of 6,000 units of Tams.
Therefore, the contribution margin per unit of Tams is calculated as:
[tex]\[ CM_{unit} = \frac{120,000 \, \text{PHP}}{6,000 \, \text{units}} = 20 \, \text{PHP/unit} \][/tex]
4. Determine the Number of Tams Needing to be Sold:
- Now, we need to find out how many units of Tams need to be sold to match the P120,000 increase in contribution margin.
Using \( CM_{unit} \) of 20 PHP/unit:
[tex]\[ \text{Number of Tams needed} = \frac{120,000 \, \text{PHP}}{20 \, \text{PHP/unit}} = 6,000 \, \text{units} \][/tex]
### Conclusion:
The company would need to sell 6,000 units of Tams next year for the contribution margin from Tams sales to be equal to the P120,000 increase in contribution margin that would result from discontinuing the Tams product.
So, the correct answer is:
B. 6,000 units
