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Relevant Costing With Highlighted Answer Key
Relevant Costing With Highlighted Answer Key
________________________________________________________
Relevant Costing
(Study Notes)
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5.1 The key is the proper handling of fixed costs, particularly allocated
common costs, and determination if such amounts are avoidable or
unavoidable
5.2 The contribution margin lost from the activity to be dropped must also
be considered
5.3 Mutually exclusive decisions a segment will be affected by decisions
made regarding another segment.
5.4 General Objective: As long as the segment can contribute in covering
common cost, it should not be closed.
5.5 Computation:
Segment Revenue (Sales) xx
Less: Variable Cost (xx)
Segment Contribution Margin xx
Less: Direct/Traceable Fixed Costs (xx)
Segment Margin (if positive = Maintain; if negative = drop) xx
5.6 Incremental Approach with consideration to additional items:
Loss Segment Margin (see previous section) (xx)
Increase in Contribution Margin of other segment xx
Decrease in Contribution Margin of other segment (xx)
Cost incurred in closing the segment (xx)
Increase/(Decrease) in Over-all Operating Income xx
6.0 Accept or Reject
6.1 A special order is a one-time order that is not considered part of the
companys normal ongoing business.
6.2 When analyzing a special order, only the incremental costs and benefits
are relevant.
6.3 Since the existing fixed manufacturing overhead costs would not be
affected by the order, they are not relevant.
6.4 General Objective: Incremental Revenue (Special selling price) should
always be higher than the incremental cost.
6.5 Computation:
Sales xx
Less: Cost to Make and Sell
Direct Materials xx
Direct Labor xx
Variable Manufacturing Overhead xx
Variable Selling and Administrative (if required) xx
Special Equipment and other requirements (if any) xx
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Instruction: This quizzer is good for 2 hours. It aims to give you the needed
practice to master the concepts of cost classification and analysis. Good Luck!!!
1. Sunk Costs
a. Are substituted for opportunity costs
b. Are relevant to long-term decisions but not to short-term decisions
c. Are relevant to decision making
d. In and themselves are not relevant to decision making
4. In considering a special order situation that will enable a company to make use
of presently idle capacity, which of the following costs would be irrelevant?
a. Depreciation
b. Variable Overhead
c. Materials
d. Direct Labor
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5. The salaries you could be earning by working rather than attending college are
an example of
a. Outlay costs c. Sunk Costs
b. Misplaced Costs d. Opportunity Costs
6. An opportunity cost is
a. The difference between in total costs which results from selecting one
choice instead of another
b. The profit foregone by selecting one choice instead of another.
c. A cost that may be saved by not adopting an alternative
d. A cost that may be shifted to the future with little or no effect on current
operations.
7. In analyzing whether to build another regional service office, the salary of the
Chief executive officer (CEO) at the corporate headquarters:
a.Relevant because salaries are always relevant
b.Relevant because this will probably change if the regional service office is
built.
c. Irrelevant because it is future cost that will not differ between the
alternatives under consideration
d.Irrelevant since another imputed costs for the same will be considered
10. In a sell or process further decision, which costs below is (are) not relevant in
a decision regarding whether the product should be processed further?
a. A variable production cost incurred prior to split-off
b. A variable production cost incurred after split-off
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11. A factory is operating at less than 100% capacity. Potential additional business
will not use up the remainder of the plant capacity. Given the following list of
costs, which one should be ignored in a decision to produce additional units of
product?
a.Variable selling expenses
b.Fixed factory overhead
c. Direct labor
d.Contribution margin of additional units
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Which of the above expenses will continue during the shutdown period?
a.All expenses in the list c. Items 1,2,and 3 only
b.All except items 5 and 6 d. Items 1,2,3,4, 6, and 7 only
20. There is a market for both product X and product Y. Which of the following
costs and revenues would be most relevant in deciding whether to sell product
X or process it further to make product Y?
a. Total cost of making X and the revenue from sale of X and Y.
b. Total cost of making Y and the revenue from sale of Y.
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22. Chow Inc. has its own cafeteria with the following annual costs:
Food P 400,000
Labor 300,000
Overhead 440,000
The overhead is 40% fixed. At the fixed overhead, P 100,000 is the salary of
the cafeteria supervisor. The remainder of the fixed overhead has been
allocated from total company overhead. Assuming the cafeteria supervisor will
remain and that Chow will continue to pay said salary, the maximum cost Chow
will be will to pay an outsider firm to service the cafeteria is
a. P 1,140,000 b. P 1,040,000 c. P 700,000 d. P 964,000
23. Jerry Company budgeted sales of 400,000 plastic guns at P40 per unit for
2012. Variable manufacturing costs were budgeted at P16 per unit, and fixed
manufacturing costs at P10 per unit. A special order offering to buy 40,000
plastic guns for P23 each was received by Jerry in March 2012. Jerry has
sufficient plant capacity to manufacture the additional quantity; however, the
production would have to be done on an overtime basis at an estimated
additional cost of P3 per plastic guns. Acceptance of the special order would
not affect Jerrys normal sales and no selling expenses would be incurred.
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What would be the effect on operating profit if the special order were
accepted?
a. P 240,000 decrease c. P 120,000 decrease
b. P 160,000 increase d. P 280,000 increase
24. Chow foods operate a cafeteria for its employees. The operations of the
cafeteria require fixed costs of P 470,000 per month and variable costs of
40% of sales. Cafeteria sales are currently averaging P 1,200,000 per
month. The company has the opportunity to replace the cafeteria with
vending machines. Gross customer spending at the vending machine is
estimated to be 40% greater than the current sales because the machine is
available all hours. By replacing the cafeteria with vending machines, the
company would receive 16% of the gross customer spending and avoid all
cafeteria costs. A decision to replace the cafeteria with vending machines
will result in a monthly increase/(decrease) in operating income of
a. P 182,000 b. P 258,800 c. P (588,000) d. P 18,800
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materials and P30 of direct labor. The plant overhead is 200% of direct
labor peso cost, and 40% of the overhead is fixed cost. A decision to
manufacture component 501 will result in a gain or (loss) for each
component of
a. P 28 b. P 16 c. P (20) d. P 4
27. S. Kent Co. has a limited number of machine hours that it can use for
manufacturing two products, A and B. Each product has a selling price of
P160 per unit but product A has 40% contribution margin and product B has
a 70% contribution margin. One unit of B takes twice as many machine
hours to make as a unit of A. Assume either product can be sold in
whatever quantity is produced. Which product or products should the
limited number of machine hours be used for?
a. A b. Both A and B c. Either A and B d. B
28. Ysabelle Industries Inc. has an opportunity to acquire a new equipment to
replace one of its existing equipments. The new equipment would cost
P 900,000 and has a five-year useful life, with zero disposal price. Variable
operating costs would be P1 million per year. The present equipment has a
book value of P 500,000, and a remaining useful life of five years. Its
disposal price now is P 50,000 bit would be zero after five years. Variable
operating costs would be P 1,250,000 per year. Considering the five years in
total but ignoring the time value of money and income taxes, Ysabelle
should
a. Replace due to P 400,000 advantage
b. Not replace due to P 150,000 disadvantage
c. Replace due to P 350,000 advantage
d. Not replace due to P 100,000 disadvantage
29. Tagaytay Open-air flea market is along the highway leading to Taal Vista
Lodge. Arnel has a stall which specializes in hand-crafted fruit baskets that
sells for P60 each. Daily fixed costs are P15,000 and variable costs are P30
per basket. An average of 750 baskets is sold each day. Arnel has a capacity
of 800 baskets per day. By closing time yesterday, a bus load of teachers
who attended a seminar at the Development Academy of the Philippines
stopped by Arnels stall. Collectively, they offered Arnel P 1,500 for 40
baskets. Arnel should have
a. Rejected the offer since he could have lost P500
b. Rejected the offer since he could have lost P900
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30. Pixie Co. produces Component 6417 for use in one of its electronic
gadgets. Normal annual production for the item is 100,000 units. The
cost per 100 unit lot of the part are as follows:
Direct Materials P 520
Direct Labor 200
Manufacturing Overhead
Variable 240
Fixed 320
Total Manufacturing Costs per 100 units P 1,280
Bobbie Inc. offered to sell Pixie all 100,000 unit it will need during the
coming year for P 1,200 per 100 units. If Pixie accepts the offer from
bobbie, the facilities used to manufacture Component 6417 could be used in
the production of Component 8275. This change would save Pixie P 180,000
in relevant costs. In addition, a P 200,000 cost item included in fixed
overhead is specifically related to Part 6417 and would be eliminated. Pixie
should
a. Buy component 6417 because of P 300,000 savings
b. Buy component 6417 because of P 140,000 savings
c. Continue producing component 6417 because of P 40,000
savings
d. Continue producing component 6417 because of P 60,000 savings
31. Maeburg Inc. has excess production capacity. At times, it buys the
same product from third party. Below are pertinent information:
Selling Price per unit P 70.00
Fixed Cost per unit* 20.00
Variable Cost per unit 35.00
*at present utilized capacity
The most it should pay for buying this product it currently makes would be
the
a. Selling price of P70
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32. Union Co. manufactures plugs used in its electrical gadgets at a cost of
P108 per unit that includes P24 of fixed overhead. It needs 30,000 of these
plugs yearly, and Divisive Corp. offers to sell these items to Union at P99
per unit. If Union decides to purchase the plugs, P 180,000 of the annual
fixed overhead applied will be eliminated, and the company may be able to
rent the facility previously used for manufacturing the plugs. If Union
purchases the plugs but does not rent the unused facility, the company
would
a. Save P6.00 per unit c. Lose P 18.00 per unit
b. Save P9.00 per unit d. Lose P9.00 per unit
33. Product A has a contribution margin of P80 per unit, a contribution margin
ratio of 50% and requires 4 machine hours to produce. Product B has a
contribution margin of p120 per unit, a contribution margin ratio of 40%
and requires 5 machine hours to produce. IF the company has limited
machine hours available, then it should produce and sell
a. Product B since it has the higher contribution margin per unit
b. Product A since it requires fewer machine hours per unit than does
Product B
c. Product B since it has the higher contribution margin per
machine hour
d. Product A since it has the higher contribution margin per machine hour
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Xtra Oils, Inc. offered Essence to supply 15,000 units of measure of the
exotic oils for P1,260,000. Assuming the facilities for exotic oils have no
alternative use, Essence Producers Inc. should
a. Continue to produce exotic oils at P 1,170,000 relevant costs against
purchase cost of P 1,260,000.
b. Produce 7,500 units and buy 7,500 units from Xtra Oils to save P
300,000.
c. Buy from Xtra Oils, Inc. at P 1,260,000 against cost to
produce of P 1,650,000 or savings of P 390,000.
d. Produce 7,500 units and buy 7,500 units from Xtra Oils to save P
240,000
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37. F & S Inc. has an annual capacity of 2,800 units of output. Its
predicted operations for the year are as follows:
Sales 2,000 units at P760 each P 1,520,000
Manufacturing Costs: P 500 per unit
Variable
P 360,000
Fixed
Marketing and Administrative Costs
P 120 per unit
Variable (Sales and Commissions)
P 40,000
Fixed
Assume there would be no effect on regular sales at regular prices and that
the usual sales commission will be reduced to half, should the company
accept a one-time only special order for 600 units at a selling price of P640
each.
a. Yes, due to incremental income of P 48,000
b. Either on would do as the net effect would be the same
c. Yes, due to incremental income of P 30,000
d. No due to the resulting loss of P 37,714
38. Nore Milling Co. has a plant capacity of 40,000 units per month. Unit
costs at capacity are:
Direct Materials P 100
Direct Labor 150
Variable Overhead 75
Fixed overhead 75
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Present monthly sales are 39,000 units at P630 each. Josh Corporation
contacted Nore about purchasing 40,000 units at P600 each. The present
sales would not be affected by the special order. Nore should:
a. Accept the special order due to P 185,000 incremental income
b. Accept the special order due to P 110,000 incremental income
c. Accept the special order due to P 215,000 incremental income
d. Accept the special order due to P 10,000 incremental income
39. Part BX is a component that Motors & Engines Co. uses in the
assembly of motors. The cost to produce one BX is presented below:
Direct Materials P 4,000
Materials handling (20% of Direct Materials ) 800
Direct Labor 32,000
Overhead (150% of Direct Labor) 48,000
Total Manufacturing Costs P 84,800
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41. The Mapili Corp. which has experience excess production capacity
received a special offer for its product at P78 per unit for 100,000
units. It has been using the variable costing method and has been
pricing its product at P96 per unit based on mark-up of 60% as
follows:
Direct Materials P 30
Direct Labor 20
Variable Overhead 6
Variable Selling and administrative 4
Total Variable Expenses P 60
60% Mark-up 36
Selling price P 96
Assuming that this special offer will not affect the market for the product,
should the company accept the special offer?
a. Yes, since it will contribute P2.8 million margin
b. Yes, since it will contribute P1.8 million margin
c. No, since it will mean a loss of P1,8 million
d. No, since it will mean a loss of P1.16 million
42. Picnic Items, Inc. manufactures coolers of 10,000 units that contain a
freezable ice bag. For an annual volume of 10,000 units, fixed
manufacturing costs of P 500,000 are incurred. Variable Costs per unit
amount are:
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Direct Materials P 80
Direct Labor 15
Variable Overhead 20
Bags Corp. offered to supply the assembled ice bag for P40 with a minimum
order of 5,000 units. If Picnic accepts the offer, it will be able to reduce
variable labor and overhead for 50%. The direct materials for the freezable
bag will cost Picnic P20 if it will produce it. Considering Bags Corp. offer,
Picnic should
a. Buy the freezable ice bag due to P 150,000 advantage
b. Produce the freezable ice bag due to P 225,000 advantage
c. Produce the freezable ice bag due to P 25,000 advantage
d. Buy the freezable ice bag due to P 50,000 advantage
43. KXM Bottling Corporation makes and sells two soft drinks. COLA
and ORANGE. The comparative data for the two shows:
COLA ORANGE
Selling price per bottle P 9.50 P 9.80
Variable Costs 6.50 7.20
Production Capacity per hour 250 bottles 300 bottles
There are 500 available production hours per month. Based on the above
information:
a. ORANGE and COLAs unit contribution margin is the same hence it is
equally profitable to produce either.
b. It is more profitable to produce ORANGE
c. COLAs contribution margin is higher than that of ORANGE hence
more profitable to produce.
d. It is more profitable to produce COLA
44. Data Covering QMB Corporations two product lines are as follows:
Product W Product Z
Sales P 36,000 P 25,200
Income before income tax 15,936 8,388
Sales price per unit 30 14
Variable Cost per unit 8.50 15
The total unit sold of W was 2,400 and that of Z was 3,600 units.
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45. Clay Co. has considerable excess manufacturing capacity. A special job
orders cost sheet include the following applied manufacturing overhead
costs;
Fixed Costs P 21,000 Variable Costs P 33,000
The fixed costs include a normal P3,700 allocation for in-house design costs,
although no in-house design will be done. Instead the job will require the
use of external designers costing P 7,750. What is the total amount to be
included in the calculation to determine the minimum acceptable price for
the job?
a. P 36,700 b. P 40,750 c. P 54,000 d. P 58,050
46. Rollin Corp. manufactures batons. Rollin can manufacture 300,000 batons a
year at a variable cost of P 750,000 and a fixed cost of P 450,000. Based on
Rollins predictions, 240,000 batons will be sold at the regular price of P5.00
each. In addition, a special order was placed for 60,000 batons to be sold at
a 40% discount off the regular price. By what amount would income before
taxes be increased or decreased as a result of the special order?
a. P 60,000 decrease c. P 30,000 increase
b. P 36,000 increase d. P180,000 increase
47. Scully, Inc. has been manufacturing 5,000 units of Part 20561 that is
used in the manufacture of one of its products. At this level of
production, the cost per unit of manufacturing part 20561 is as
follows:
Direct Materials P2
Direct Labor 8
Variable Overhead 4
Fixed Overhead 6
TOTAL P 20
Muller Company has offered to sell Scully 5,000 units of Part 25061 for P19
a unit. Scully has determined that it could use the facilities presently used to
manufacture Part 25061 to manufacture product X and generate an
operating profit of P 4,000. Scully has also determined that two-thirds of the
fixed overhead applied will continue even if Part 25061 is purchased from
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48. Buck Company manufactures part no. 1700 for use in its production
cycle. The cost per unit for a 5,000 unit quantity follows:
Direct Materials P2
Direct Labor 12
Variable Overhead 5
Fixed Overhead 7
Hollow Company has offered to sell Buck 5,000 units of Part 1700 for P27
per unit. If Buck accepts the offer, some of the facilities presently used to
manufacture part 1700 could be used to help with the manufacture of Part
no. 1211, and P3 per unit of the fixed overhead applied to part no. 1700
would be totally eliminated. By what amount would net relevant costs be
increased or decreased if Buck accepts Hollows offer?
a. P 35,000 decrease c. P 20,000 decrease
b. P 15,000 decrease d. P 5,000 increase
49. Mach Company produces and sells 8,000 units of Product X each year. Each
unit of Product X sells for P10 and has a contribution margin of P6. It is
estimated that if Product X is discontinued, P 50,000 of the P 60,000 in fixed
costs charged to Product X could be eliminated. These data indicate that if
Product x is discontinued, overall company operating income should:
a. Increase by P 2,000 per year
b. Increase by P 38,000 per year
c. Decrease by P 2,000 per year
d. Decrease by P 38,000 per year
50. Tyler Company currently sells 1,000 units of product M for P1 each. Variable
costs are P0.40 and avoidable fixed costs are P400. A discount store has
offered P0.80 per unit for 400 units of Product M. The managers believe
that if they accept the special order, they will lose some sales at the regular
price. Determine the number of units they could lose before the order
become unprofitable.
a. 267 units b. 500 units c. 600 units d. 750 units
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51. Assume none of the fixed expenses for the hard rubber line are avoidable.
What will be total net income if the line is dropped?
a. $125,000 b. $103,000 c. $105,000 d. $140,000
52. Assume all of the fixed expenses for the hard rubber line are avoidable.
What will be total net income if that line is dropped?
a. $125,000 b. $103,000 c. $105,000 d. $140,000
53. What would have to occur for total net income to remain unchanged when
the hard rubber line is dropped?
a. Total net income could not remain the same if hard rubber is dropped.
b. The avoidable fixed expenses for hard rubber would have to be
$15,000.
c. The unavoidable fixed expenses for hard rubber would have to equal
its contribution margin.
d. The avoidable fixed expenses for hard rubber would have to
be $7,000.
54. If the total net income after dropping the hard rubber line is P105,000, hard
rubbers avoidable fixed expenses were
a. P20,000 b. P2,000. c. P7,000 d. P5,000
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56. Eagle Brand Inc. produces two products. Data regarding these products are
presented below.
Product X Product Y
Selling price per unit P100 P130
Variable costs per unit P80 P100
Raw materials used per unit 4 lbs. 10 lbs.
Eagle Brand has 1,000 lbs. of raw materials which can be used to produce
Products X and Y. Which one of the alternatives below should Eagle Brand
accept in order to maximize contribution margin?
a. 100 units of product Y.
b. 250 units of product X.
c. 200 units of product X and 20 units of product Y.
d. 200 units of product X and 50 units of product Y.
57. Oakes Inc. manufactured 40,000 gallons of Mononate and 60,000 gallons of
Beracyl in a joint production process, incurring P250,000 of joint costs.
Oakes allocates joint costs based on the physical volume of each product
produced. Mononate and Beracyl can each be sold at the split-off point in a
semifinished state or, alternatively, processed further. Additional data about
the two products are as follows.
Mononate Beracyl
Sales price per gallon at split-off P7 P15
Sales price per gallon if processed further P10 P18
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58. Current business segment operations for Whitman, a mass retailer, are presented
below.
Merchandise Automotive Restaurant Total
Sales P500,000 P400,000 P100,000 P1,000,000
Variable costs 300,000 200,000 70,000 570,000
Fixed costs 100,000 100,000 50,000 250,000
Operating
income (loss) P100,000 P100,000 P(20,000) P 180,000
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are P11 per unit. Fixed overhead is allocated based on planned production
levels. If Aril Industries continues to use 30,000 units of Part 730 each
month, it would realize a net benefit by purchasing Part 730 from an outside
supplier only if the suppliers unit price is less than
a. P12.00 b. P12.50 c. P13.00 d. P14.00.
60. Lark Industries accepted a contract to provide 30,000 units of Product A and
20,000 units of Product B. Larks staff developed the following information
with regard to meeting this contract.
Product A Product B Total
Selling Price P75 P125
Variable costs P30 P48
Fixed overhead P1,600,000
Machine hours required 3 5
Machine hours available 160,000
Cost if outsourced P45 P60
Larks operations manager has identified the following alternatives. Which
alternative should be recommended to Larks management?
a. Make 30,000 units of Product A, utilize the remaining capacity
to make Product B, and outsource the remainder.
b. Make 25,000 units of Product A, utilize the remaining capacity to make
Product B, and outsource the remainder.
c. Make 20,000 units of Product A, utilize the remaining capacity to make
Product B, and outsource the remainder.
d. Rent additional capacity of 30,000 machine hours which will increase
fixed costs by P150,000
61. Raymund Inc. currently sells its only product to Mall-Stores. Raymund has
received a one-time-only order for 2,000 units from another buyer. Sale of
the special order items will not require any additional selling effort.
Raymund has a manufacturing capacity to produce 7,000 units. Raymund
has an effective income tax rate of 40%. Raymunds Income Statement,
before consideration of the one-time-only order, is as follows.
Sales (5,000 units at P20 per unit) P100,000
Variable manufacturing costs P50,000
Variable selling costs 15,000 65,000
Contribution margin 35,000
Fixed manufacturing costs 16,000
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62. The Furniture Company currently has three divisions: Maple, Oak, and
Cherry. The oak furniture line does not seem to be doing well and the
president of the company is considering dropping this line. If it is dropped,
the revenues associated with the Oak Division will be lost and the related
variable costs saved. Also, 50% of the fixed costs allocated to the oak
furniture line would be eliminated. The income statements, by divisions, are
as follows.
63. Aspen Company plans to sell 12,000 units of product XT and 8,000 units of
product RP. Aspen has a capacity of 12,000 productive machine hours. The
unit cost structure and machine hours required for each product is as
follows.
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Unit Costs XT RP
Materials P37 P24
Direct labor 12 13
Variable overhead 6 3
Fixed overhead 37 38
Machine hours required 1.0 1.5
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65. Lazar Industries produces two products, Crates and Boxes. Per unit selling
prices, costs, and resource utilization for these products are as follows.
Crates Boxes
Selling price P20 P30
Direct material costs P5 P5
Direct labor costs 8 10
Variable overhead costs 3 5
Variable selling costs 1 2
Machine hours per unit 2 4
Production of Crates and Boxes involves joint processes and use of the
same facilities. The total fixed factory overhead cost is P2,000,000 and total
fixed selling and administrative costs are P840,000. Production and sales are
scheduled for 500,000 units of Crates and 700,000 units of Boxes. Lazar
maintains no direct materials, work-in-process, or finished goods inventory.
Lazar can reduce direct material costs for Crates by 50% per unit, with no
change in direct labor costs.
However, it would increase machine-hour production time by 1-1/2 hours
per unit. For Crates, variable overhead costs are allocated based on
machine hours. What would be the effect on the total contribution margin if
this change were to be implemented?
a. P125,000 increase c. P300,000 increase.
b. P250,000 decrease d. P1,250,000 increase.
66. Basic Computer Company (BCC) sells its micro-computers using bid pricing.
It develops bids on a full cost basis. Full cost includes estimated material,
labor, variable overheads, fixed manufacturing overheads, and reasonable
incremental computer assembly administrative costs, plus a 10% return on
full cost. BCC believes bids in excess of P925 per computer are not likely to
be considered. BCCs current cost structure, based on its normal production
levels, is P500 for materials per computer and P20 per labor hour. Assembly
and testing of each computer requires 12 labor hours. BCCs variable
manufacturing overhead is P2 per labor hour, fixed manufacturing overhead
is P3 per labor hour, and incremental administrative costs are P8 per
computer assembled. The company has received a request from the School
Board for 500 computers. BCCs management expects heavy competition in
bidding for this job. As this is a very large order for BCC, and could lead to
other educational institution orders, management is extremely interested in
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submitting a bid which would win the job, but at a price high enough so
that current net income will not be unfavorably impacted. Management
believes this order can be absorbed within its current manufacturing facility.
Which one of the following bid prices should be recommended to BCCs
management?
a. P764.00 b. P772.00 c. P849.20 d. P888.80.
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Synergy applies variable overhead on the basis of machine hours at the rate
of P2.50 per hour. Models A and B are manufactured in the Freezer
Department, which has a capacity of 28,000 machine processing hours.
69. The Doll House, a very profitable company, plans to introduce a new type of
doll to its product line. The sales price and costs for the new dolls are as
follows.
Selling price per doll P100
Variable cost per doll P60
Incremental annual fixed costs P456,000
Income tax rate 30%
If 10,000 new dolls are produced and sold, the effect on Doll Houses profit
(loss) would be
a. P(176,000) b. P(56,000) c. P(39,200) d. P280,000.
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b. Increase by P37,500.
c. Increase by P22,500
d. Increase by P52,500.
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