Se Chapter 9 Short-term Non-routine Decisions 454 REVIEW NOTES 1.0 Types of business decisions 1 Business decisions may be classified as strategic, tactical, or operational ae Strategic decisions have long-term effects (eg, more than a year), its focus is growth, Stability, and sustainability, and its objective is to meet the needs of investors (i.e., wealth accumulation). 4133. Tactical decisions are regularly made to have medium-term effects (eg, | year or less) in organizational results. : Operational decisions are made on a daily basis where the judgmental § call of a supervisor is at its greatest use; it is made regularly and has short-term effects, The focus of tactical and operations decisions is profitability and liquidity, and their immediate goal is customer's satisfaction. 1.5. Short-term non-routine decisions are within the ambit of tactical and Operational decisions. However, these decisions are not covered by the standard operating policies (SOPs) of an organization. They are non- recurring, and non-repetitive in nature. 1.6. Profitability is the primordial criterion in making short-term non-routine decisions. 2.0 Relevant Costs ¢ 2.1, Relevant costs are those being used in making a decision. 2.2. Acost to be relevant must be both differential and future cost. 2.3. Differential costs (or incremental costs) change from one alternative to another. In making a decision, you have at least two (2) alternatives or options. If a cost differs from one option to another, that cost is differential. The normal examples of differential costs are the variable p production costs of direct materials; direct labor, variable overhead, and | variable expenses. Avoidable fixed overhead is also an incremental cost. if Incremental variable production costs and avoidable fixed overhead are, | normally, relevant costs. | 24. Those costs that remain the same from an option to another are irrelevant in that particular decision situation. | 2.5. Incremental costs are those that increase from one alternative to another; | decrémental costs are those that decrease from one option to another. 26. Future costs are referred to as planned costs, budgeted costs, projected costs, or estimated costs. Future costs are yet to be incurred in the “Upcoming activities. If a cost is not a future cost, it is automatically not relevant.ee 3s Short-term Non- @ 2. Sunk cost (or past costs, hist = cannot be incurred in the future, 8 2.8. Acost may be relevant in one d = another. . = 2.9. Since short-term non-routine 2 cailed as relevant costing, in ir = 3.0 Topics in the short-term non! 3.1. Short-term non-routine decisions possible situations where standar i However, only the following decisional i CPA Board examinations: cremental o™ routine Decisions Chapter orical cost) cannot be changed further. ‘and is not relevant in decision-making ' ecision setting but may be irrelevant hy ions use relevant costs, such g, decisit | costing, or differential costing, routine decisions (or relevant costing) are applied in ay d operating policies are not availaple | situations are normally given jin the i [TUS Shortterm “Decision — “Non-routine situations __.- Guidelines -__ 4, Make or buy (insource or “The alternative that gives lower relevant cosis |] outsource) a component part?__{ gives. savings, and, should be preferred. | 2, Accept or reject special sales If there is an incremental profit, accept! order? £ 3. Drop or continue an organizational segment (e.g., division, department, or product line)? Ifthe direct segment margin is positive and there is no other moré beneficial alternative, then, continue! If there are complementary effects, they should be consid 4. product? If there is @ profit from further. ssing, fen process further! %. Continue operations or temporarily — shut down the operations? If sales are greater than the shut down point i | would be better to continue operating! | | | 6. Maximum or minimum bid price? Focus on the in 7. Optimization of scarce resources 8. Sell now or later? ioe ae | Prioritize the product that gives the highest contribution margin per limited resource__ If the expected increase in sales is greater tat the incremental cost of storage, then. sell later, 9. Replace or retain an old asset? If the net cash inflows are greater than the nt | outflows, replace the asset! (here the time vale of money and iax effects are not consivered 70. Scrap or rework a defective unit? Choose the alternative that gives the high | 11. Determining the indifference point indifference point is the *paiat of eqvaity, | where the results of the alternatives are he same, in terms of profit. __ A | 72._ Miscellaneous topics Use the benefit-costs analysis —| )mae hy Chapter 9 Short-term Non-routine Decisions 436 4.0 | Make or buy a component part... an insourcing vs. ourtsourcing 7 issue .. Which option gives a saving? = 9 4.4, The tabulation of relevant costs in making and buying a part is as follows = i Costto Cost > make — to buy az Purchase price Px ~ Direct materials Pox Materials handling costs x * Direct labor x Variable overhead x Avoidable fixed overhead x Savings if the part is bought ' (x) Rental income from released facilities ' ()- Contribution margin from a new product being produced using the released (x): facilities * Rental expense if the part is bought ee Total relevant costs Pp x if all of these alternatives are present, the best alternative should be chosen 4.2. The variable production costs (e.g., direct materials, direct labor, and variable overhead) are incremental costs, and are normally relevant costs. 4.3. The avoidable fixed overhead is also a televant cost since it varies from one option to another, ie, from option making to option buying. 4.4. The unavoidable fixed overhead cannot be avoided regardless of decision made whether to make or to buy the part. This cost does not change, and therefore, is irrelevant. 4.5. Materials handling costs apply to materials and other purchases and are normally allocated based on a purchase cost. Inasmuch as the cost of purchase changes, consequently, the allocated costs change as well, and therefore are relevant costs in the short-term decision making, 4.6. Savings from parts bought, rental income from released facilities, and * contribution margin from a new product all happen when the part is bought. They are all inflows, either in the form of savings or additional income, and as such are deducted from the costs of buying.4, ae Short-term Non-routine Decisions a Soir J Shut | Minor propor | nowor | down or | maxtbid | Scrap Grrlve | process | not | pew? | ar ‘Aceant oF further? reject? s STRAIGHT PROBLEMS 4, Make or buy a part? Bauer Corporation is studying whether to continue making or buying part 235YY. The following data are obtained for analysis Unit purchase price offered by a reliable outside supplier P80 Unit production costs: Direct materials , 30 Direct labor 15- Variable overhead 10 Fixed overhead (40% avoidable if the part is purchased outside) a Unit variable administration, marketing and distribution expenses “>” 5 Unit fixed expenses - 6 Budgeted capacity in units 20,009 Materials handling costs . , 10% of cost - Rental sapere Provided to suk-contractor w 4 20,000 Potential income from ral iti Rental incorne leased facilities 250,000 Additional contribution. cu 320,000 Profit from special sales POU 120,000Chapter 9 Short-term Non-routine Decisions 464 Required: a, The savings per unit of the better alternative. b, The indifference purchase price. cc. The unit purchase price to realize a savings o d, The amount of rental income needed to gener company had decided to purchase the part, and a the best alternative use of the released facility? PS from buying the part. ate a savings of P300,000 if the ssuming the rental income is 1. SOLUTION GUIDE a. Advantage of the better alternative Make _ Buy Unit purchase price P80.00. - Unit variable production costs p30+P15+P10 — P55.00 Avoidable fixed overhead 40% x PB 3.20 Materials handling costs 10% x P80 8.00 40% x P30 3.00 20,000 / 20,000 1.00 Rental expense Benefit from the best alternative of the P320,000/ 20,000 released facilities es Relevant unit costs P6120 P73.00 (16.00) Savings per unit P11.80 b. _ Indifference purchase price Relevant unit cost in making the part P61.20 Opportunity cost from the best alternative 16.00 Rental expense 1.00) Balance 76.20 Indifference purchase price (P76.20 / 110%) P.69.27 c. Purchase price with a savings of PS from buying the part 4 Relevant unit cost in making the part P61.20 } Savings from buying (5.00) Opportunity cost from the best alternatives, 16.00 Rental expense } (1.00) Balance on 71.20 Indifference purchase price (P71.20 / 110%) |REVIEW NOTES|a Short-term Non-routine Decisions d. Required rental income o Purchase price 20,000 x P80 P'.800.000 6| Materials handling 20,000 x P1 20.000 2 Rental expense 20,000 2 Total cost of buying before the required rental income 1,640,000 w Total cost of making the part ; FA Variable production costs 20,000 x P55 P00.000 &| Avoidable fixed overhead 20,000 x P3.20 4.000 =I Variable expenses 20,000xP5 9 Materials handing P1,100,000 x 10% 110,000 4,374,000 Advantage of making the part before rental income 266,000 Desired net savings from buying 300,000 Required rental income 986,000 2. Accept or reject a special sales order? Tabachingching Corporation provided the following information with regard to its product Batchoy: £ Regular unit sales price P200 Regular unit production costs: - Direct matenals 40 Direct labor 30 Variable overhead 20 Fixed overhead 15 Regular unit marketing and distribution expenses Variable expenses 8 Fixed expenses 7 Maximum capacity 50,000 units 4 : Present capacity 46,000 units [kab Special sales order by a one-time special customer 3,000 to 6,000 units =~ Special unit sales price P120 f Required: a Determine the effect to profit if a 3,000-unit s; each of the independent cases below: 1. unit variable expenses decreased to P5.50, 2. total fixed overhead increased by 10% b. Determine the effect to profit if the 6,000-unit sj each of the independent cases below: 1. excess order is bought from a comy 2. excess order is outsourced fror the relevant costs of producing pecial sales order is accepted in Pecial sales order is accepted in petitor at the prevailing market price. mM an independent supplier at P10 higher than the part.\ t Chapter 9 Short-term Non-routine Decisions nD e 2. SOLUTION GUIDE ° at z Incremental sales 3,000 x P120 P360,000| Incremental variable production costs 3,000 x (P40 + P30 + P20) (270,000) 2 Incremental variables expenses 3,000 x P5.50 {16,500)) iy Incremental profit P_73,500/% a2 Incremental sales 3,000 x P120 360,000 Incremental variable production costs 3,000 x (P40 + P30 + P20) (270,000) Incremental variables expenses 3,000 x P8 (24,000) Incremental fixed overhead 50,000 x 10% x P15 {75,000} Incremental profit P_(9,000) b1 Incremental sales 6,000 x P120 P720,000 Incremental variable production costs 4,000 x P90 (360,000) 2,000 x P200 (400,000) Incremental variable expenses 6,000 x P8 (48,000 Incremental profit (88,000) b.2 Incremental sales 6,000 x P120 P720,000 Incremental variable production costs 4,000 x P90 (360,000) 2,000 x (P90 + P10) (200,000) Incremental variabie expenses 6,000 x P& (48,000 Incremental profit P112,000 Drop or continue a segment? Shocking Company produces and sells two products with the following income statement data in 20CY: _ in pesos) Product 1_| Product 2 | Total Sales 7 300 600. 900 (dy = Variabie costs {120 200 \ 4 Contribution margin 180 = Avoidable fixed costs 100 Segment margin 60 300 [= Allocated fixed costs 200 200 ~ [Profit (loss) (120) 100 - Required: Determine the effect of the following independent cases to the overall profit of the enterprise. a. Product 1 is dropped. b. Product 1 is dropped and 15% of the allocated fixed cost is eliminated.fi 5 © reposted ome Han Pt ta 5 Beet os 40% of the products avodtanie fxod, p+ Reba erate act gt mnetacoaeh Ey eaurousure _ Z| Soh Dpetease ptt due to ost poste rg poasett Decratein pt aie iobbsostve segment marge of ‘Etro in tected fos cot (200.000 157) Dereon i due la postive spmertmarpnct EDiemeroace mine CM of roc 2 (40,090 x40) © Somme neacane rroootosdow “esoea, Eon aecreave 1 Gc ros 2 (PACOECO 206) etisresoein ne overs po ‘Aasatvly. th salves maybe mate Mal pO1CAO" 35 elows (amounin rainy bea ON era ng Shatarensiovion ste eeaartynsees grow GUIDE 7 Se eaarase of te Dates aera Stam tbe new machine (POCSU~ 942 Soovervabe temthe olmache toy 1M 4¥ea Pz co9 = doo FET sonar ret a Renew NOTES! etcanh ottow Spren an Se efor nea att eam Bel erst ouow atthe da cf burn ma oom #8 tee burg te row msstce 700g Pricing] |e maemo igh Cran tig we ais a aertag pct ta ree) sion enced © 28 sind a's a of oe ae ee NM ° ‘Sonate neta uu sa tray tm sr, Ts fee eeurry. The flowing des pec anu ae serence ny Nae ontiad bong cone THES wth act te ter eth Eom sr goo elo to & secsontet Gonacinn 22 8 Bs tetas pie ranse Sa, 88 8 BS Ete Season cos view 2 8 Bs Keone ae ng ae ‘nm = 2 fo ms sumer cormacone exis : = SB oe 2B fete ns srs Eee ean fey 8 oe ESetrennes sos goo Secintresoen rae © Haun crrenacy anos? etc ne ens a0 isto Een argu coreg eee on 1 etn ies Bd Nec don {iim seco snnoedbetoomg ate rans Nserare ‘ionoe Yates ou lew feowes Puce ce PrStmog ren Pine po eran atorave tine 7 a Me aicenr pontine of steraties Kesamvawe-now 026m ng Meher pont ger bw atoraes serayens vere coe Aimoleceeingecnses Pr2macn PO68 won tS ———gle soumonovoe TP awroinemater eter romewncost trance copoatn BL 8 eataren ones um oiter ‘lable Reaurementce Copan g 3 Sees ‘aty ey rt : | untsaeseree Parse “Re, Bee nla alias on ® erates cred poeta ‘Se "a eee? ae opts Sere 13 = §] Serer. PStH8000 Pegs tier! Po mior Fe shy =| see ae oo, Ban ser rm tnt ott mo ren spree ta ‘eine es Aa a a rccucioncals a eee or eaten Naseer ome ests ets ossmisn rigs" | 1D Ingiference port in units equ i the comoany’s unting tacor (1, Deters)? ee PI eon oc Bo oere m= $6053090- paeaing | | 8 wr CCM Sates unitax UCM = P1.390,000 Ine comosny nereates ts recurs as sued below, now ach inerens Fe ca woud ie imac m oft be) o x - 2105009 Pannen) = 79055000) -Pastoey Giantess nee) 300 T0X~ P2.520.000 dma @. materials ncrease by 2,700 carts. a thalahepresst pet aie oe buses? — é £ Weiahes nmrpne crn po ane 85% ~ 3,096,000 = 70K~ 2,520,000 1, Hine entorprase wants to a prott of P4C0,000, what ere tie rescurces i necds to ioe manos 3 Sie | | fr swowsuoe SP teiming feo te on tat canis te canpary © pete at > meee ori pee Fave | ons cay teas be ny cae tag tegenene gt ET ossrsscnm.nm| P| © Smouu stony ne wuatecs nd renee 2 a sn ease Resarce capaty nuns Oe’ olimtng cr enc re esastn-sase uot 38 7 peur _= 5a 39800 mame rset ue ae ; Matos tx 2 0800 : / tebe ‘eco 5 | hove’ Boe. 4 There ne Hoe 5 oom 4376000 "lie Dsspte te increate inthe cect eter hous ef the erterse Ro pansmon Bi peda Wout «afte arta o matena sano nde peccion AIRES solabity ceases oy 2 pare he wonrten easy he Toe ee Wtf materi avaaouty crease ty 90 us fe 27029) neat Brg he ical unis to 6 400 eis (7.500 + $02) Howes PO bo eeravaned at 7.09 wns base el be = retranod at 7299 palpecose RoW craraneg ee me o2,oh 3 a x [ra comet igen an Trine pee 3 tad Pept rows tena |e B | Reina Sie ts maemo, yaaaperamenerapraning fr owe Sug |B B] ot Eason arn 500 wis xP) renee ts Se es ce fm eno ope |G : ‘ea fee inn sae ate iz : era fom oS abe z =) 5 cemmsenmanncestoran sr reer er cnang cone orentoe ge sat acon ss seotco 27003 z20c00 se rials ‘esr Cewavetomet noon, a 1 Desired prott ee ater tthe processing — Fresco ‘ Rseesacional processing 286.000 250000 60 Bagger itera 5090 cat (oe) dicime eleon eee E } in at Hiloenee he? vane ge P| Stat Lae * ng ot om pen 8 P 10000 | ae omit saat te Yor Pea! a | Serena) Ne EArt AEE | (81.875 ~ 8.000) 2860, Saete |S setaaattonal processing costs — Product A ‘P280,000 | {Fats poet or ster? | “Mesiealposseang one Pea'® "ae. Eran ge lee poe tema et pecan ||, Tesolin ene Si Can) ey Ot esos oe a pesmnestroe nope bi Progict Product Product Tate! | Incremental sales, ‘200,000 + 830,090 930,900 ae he OS (Serer po pare Ue ose steetort Fico Feo Pace (Srhewreratcass of tener ponsing es) Unter cienira | PaEe PMB Ped | Unrocrren ature posers eS pan) z2bune Hae | | @ Te suk cost he ret et poesia con of FZ990000. come Meee mires iee0) 100) T2000 AE Bors ' WeStoe torpor Srrpoticten cose ent Reaatiaetenstyseae! S000 70000 zn00 mH ovine vols Fem ty prods re Sree penne int recon sv fren aa } Eisen saea ‘tee 12020 19000 1900 Semen SH | © guctwnor cote opto eon sume Pare @ coating engraving 1s operons he fetes ‘srs ay and Agua os aos bust saeohos_ ory hie 2" Wine precuns noal bo procaess futho? 1 The atten rte tthe processng to maize pos? The raevateates! nar posesorgitsmanimze prot {Sra econctering and repare woud be done m reparaton to Petar ae! Sr/ces| The olewng data ave gahared rion 0M 0083 4 re company ers a rc 2cS800 on er process, YO" Eee a page nue Sr hemo at ea err pea = Matar coes po guest S Seconounyt fr nreerct pose ut «ne «: The am cn in he ces m ste prac) a stk york 7 bao mt get, “on Tres numberof erty quest ly and Agus —a Sorte Niet Deion %_——_Reputarmortny need costs nd expenses a ‘alates 5 Rent 2 Premotena and oavetng 2 Dither eed cone as expenses ests morny ued cot and eapersesin July and August BV heceroton oe st conn Sunes Promaters and 2oversrg f 2g 2exer 55555 {30% unavcesbe nated oy 220 Ce ere ele ‘Stemacuaste notteee fpiot See caroigieomnet terghens ae own rene She own pare Efe ant fhe busines contnuee creating Jy ‘SOLUTION cuIoe 2 ut mcs ‘sates 750 0012 ent reo 00002 | Prometins and averting soo 30%? (ee nt a eres Psoo0 Abs 2 BS inl igen lights | tg, A ua | Fe is | = priqoto *pe0 = 500 boc ow 400429990 7aac00 Foe. (390000 | Lass fem cortnaig cperatnns 72700000) | sss tom shitrg epertors (2216030) | Aecartage ot cerknung parabens B-A82.000 ond ages Pasta om 3 oe ‘eo. stoee0 pr2tee Setter Nonsetine Dhoe one! om er? z «gst 21 ay eels aMfacts ad other hitorea ems, ks row tly g arn aoe cena ie mat Tie to very P07 moe E Cots mony tog ne secalpee Face 3 eon rion i See geee 8 mets tonne FAB eon = ee sec age (indvartage) cl stn te mescandie eon moh er 1 Retr cin he deco ere " 7 soTioN GUIDE — TSUN core 920M —P2ean canon Cermumtatcos 20,0008 a sage Seng he matrendscht mers wer Pano 9 SaMMBED Giscnoanatematne sent ot aeenoey oF "t Sembs Comoraton produces 266,000 Unts Where 10% ie Pose consdere as tlevant or terete a Choice-letier * nla costs are those incomect because that change with each ol only variable cost rt neeeeeaUSe a change in cost athough has an Not necessenly always refer to optmum sharee costs changes as wel Is not aecey affect or change in profit may Which one of the ‘following is most replacement decision? A Original cost B. Disposal price levant toa manufacturing equipment. (ema) ‘Among the given, the most rele vant tO @ menulacturng equipmentrepiacement decsion, 5 5 a 5 é g 4 a jeb'zcement decision, relevent costs inchde those eer ae eucet cash flows, savings, and related tansactonel er een Chcice- leter“b" is correct because the disposal the okt equipment is an inflow and ent, reduces the net cash neeced Choice-letter ‘a’ is incorrect, sunk cost and can no longer change Choi less does not have a direct impact on cash flows losses are relevant and in Incorrect because a '8 expunged trom the change from an alternati the old equipment is 2 incorrect Dacause gain o- Howaver, tax effects of ga cludes in this decision. Choi Toiluntcdss are Relev FR relevant is. 5 tnleBendent ofthe cost ayser used to generate thom © Needes for determining product contibujer: (oma) 38 * Descrgton of ota unit cost [MULTIPLE CHOICE] ONtine Decisions ‘Short-te1m Non-toutine Decisions oe ©" ate inconect because all of tem are unavoidable fed Chapter 9 .b", and ee unt neg aoe i ring wheter maruactire a ae uy tom an xe fer costing, prozess costing wot 6 evant tothe short-run decision fe vendor, a cost fae me activ ‘iners. The comet. ; fon the computce coet and cable overnea Bearigs on te comptes ua 2 et ee 1m profi-imizing appr ee vernoad'Iha wil coninue eves Pate oat inevest snr-term profitméximizing aprech ey fied s 5 cee 8 Oc inti vlevantn shore dein, meneame fon 7, Memiant costs are past cost and do not change from a because fxed overhead ie const och le wet Chora oes ; a ‘ause they are diferental costs and chance fem 8 boat hotter pa 2 mmenginl Soetng Apbroech. in i Ser bee te way 10 pr Jn margin less fixed Costs and expensns eter! fo umat is the opportunity cost of making a component pot in fciny luen ro 32h, 2s ceronirioution margin is @ Peso increase in prof, mative use of the capacity? ‘hs means tat a peso nea ere tp maximize Dr meaNE moxmng ater total manufacturing cost of the component 8 3% —Consicering that Fee rand per unit B Zero. 9 5 inper Heh had operating‘Shorter No chapter? horetetn Non teutine De tor tne appropriate product is discontinued s 7. The expected income aft 5! The expect ara ofeach product stoud Be computed 10 determine yp, peal, Tee ° f g noe Muy sales 600,000 pe ree cesninued 2 font Vanable costs (20009) Gren 29 c J P Gontrisution margin P2,700.00) PHecagye 2:02.00) 200000 180,000 125,099 cuRatio soak sree, Lscome (95.000) (75,000) ( 50.000) juct Tac is the most pr mu 7 twedoos's (80.00 (35.000) ; sve aux onsen re (40,009) therefore, it is the product that must remair cghest CMR of 67 92% 248,000 | P.40.009 P3809 ptosia prosuct Tac means eset te connie i © be elated jon) and product Tor (P19 million) oF total oppor ant Produet Tic (P27 : ‘costs of Pa 6 miion 2, Nekinnat Corporation's Outlet No. 5 reported the folowin the period just ended: 3 following results or operations fer product P gwes the lowest prof and shall be eliminated inasmuch 35 on ys iod.tas shall now be produced by the company as they move to @ smaier adi tnitn products C and J remaining, the operating prot of the business chal be 2,500,000 gegment margin (PA6,000 + P 40.000) 85,000 7 Rlocated fad costs [(P35,000 + P40,000 ~1on00n 60%) 60,000 000 eS) B.25.000 750.000 = ig cowect The ellacated fixed cost remains unchanged a ‘ £0,000. gq 13s of whether a product of discontinued or not ms Depreciation on equisment 325.000 3 ‘ savetsing $00,000 1,625.00 aw oy 8 "Tac! and “Too'. There Pratt Loss) B12s.00) g é 1 due to provonged abser ‘The management is contemplating the croosing of outet No S cue to te 4 racer Depreciation expense amourts to 600.000 emiah unfeverabe operational resuls, W ln Wood Reepen, ao eafonee oi rae we © z ing expenses amount fo P650,000 per year. The sales and varane retained with an annual salary of P150,000. The equisment tas no resale value. 2 5 prosuste procuct are (000's omitted) OuiletNo. 5 should z 3 Tic Tac Too. ‘A. Not be dropped due to foregone overall income of P850,000, 3 B 2 3 = Sales P6600 P5200 P10,800 Be dropped due to foregone overell income of 326,000. 3 Vanable costs 3.900 -1,700«=S« 8 900 & Nate dropped de to fovegone oval some ct 25 0, = \Which product must be retained and what is the opportunity cost of salecing 4 fh >PPES due to overall operational lass of P26 000 (p00) product line? ‘A. Retained product “Tao’; opportunity costs P4.6 iy Me gventtative ettect of dropping or continuing outlet no. 6. In te short-term analysis of dropring or continuing the operations ofa deparinen. Product tines, activity or process, the focus of the analysis is tha segment (or direct, ©. Retaned product "Too"; opportunity cost is P4.48 milion, (p78) Product) margin. As long as the segment margin is postive and there are ne other Opportunity costs, the department, etc. should be discontinued. The marginal analyss 6A ai Matis shown below: 7 The product that must be reiained and the opportunity cost of selecting S4°n Contribution margin 1,500,000 , line. > i Direct controtiable fixed cost 2 The product that must be retained is the one that gives the highes! Oh, leries and wages (P750,000—P160,000) (800,000) ‘margin based on the company's limited resource. The problem 085 jad Insurance on inventories (50,000) company limited resource. Tharefore, it could be assumed that there $ Direct controtaie margin 2150000 resource. The ba: cing mary! sing is considered facut The asm mag aceon sa bg one cree" val esecar on spe af wile ery hana aloeated Ys and are resevant in do=ing costs, Both are uravoldeble cos! eng ‘Whether to crop or continue outlet no. In as much as he rect conolane mg _. ec gfsu Short-term Non-routine Decisions ostive and.here is no given opportunity Costs in using the released i, doparemart ust be conirued because dropping the Separtmant f the business by P850,000, UE feoucing the overal p 62, Hign Class Townhouse, Inc. manages five upscale townhouse in Makat: Gemma ace Stour teow ae te summery eons caer St mpl o _ In Thousand Pesos _ One Two Three Four Five Rent income 10,000 12,100 23,470 10.569 Expenses 8.000 43.000 26.000 toce Pre 2.000 (809) (2.930) Included in the expenses is P12,000,000 of corporate overhead al tonancuse based on renal income. The complex thatthe comrary shout os cropping cer A. Three, four and five. C. Two, Three, Four and Five & Fourand Five D. Four trey, zea © 7 The complexes the company should consider dropping. Q (21 A dnision, product line, or department may be considered for sale or discontinuea¢ = the direct the division, etc, is negative. Direct margin is the dflerene 8 Inasmuch as the poser aa 4 the focus of evaluation shall be = The variebie costs and expenses are not given and is ta 5 Vows: 2 T ow non ou soe 8 _ 1 2 2 4 5 fv 6.000 P1300 P2600 P2400 P19.000 expenses of rental al.e00 1.039 _3.755 5.400 Biss Pz2.245 tal revenue is P75,009,000. This fraevon for townhouse No.1 1s '5; tor Townhouse No. 2 is P12.4/P75, etc.) ‘The contribution margin ofthe townhouses ate: T o won hoo u s e § 1 2 3 4 8 P10,000 12,100 23,470 P18,780 10.850 6400 11,064 22.245 _20,905 P2500 Pio P3229 [P2219 ‘Townhouses 4 and 5 refiect a negative contribution margin and 2 be recommended for discontinuance because these townhouses are no! . to but are instead reducing the overall profit of the company. The™ ‘opportunity costs given that may be considered in the analysis. refoe! ibid ae Short-term Now routine Dee _ isons sa tions 64 through 66 are based on the pod ‘Suburban tore Store Total na 80.020 120.900 200900 Variable costs 2000 84000 “a6 900 Contribution Margin 48.000 36,000 “aeogg Direct fxed costs 20.090 49000 gc 00 Sore segment meran 28.000 (4000) “Sea fixed cost = _4.000 6.000 _49.999 profit F2g.000 P0000) Es4.009 fmation regarding Frodo's operations follons: + One-fourn of each store's arect fixed cosis wouls continue ethers cosed + Frodo allocates common fed cass to each store on te bass 0! sues sence + Management estimates that closing Suburoan Stote woud tesut he wom decrease in Urban Store's sales whereas closing Urben Store would ro aoc: ‘Suburban Store's sal ‘The operating results for May 2013 are representations of al months 64. A decision by Frodo to close Suburban Store would rest (Gecrease) in Frodo's operating profit of A P (10.600) cP 4000 BP (6.000) DP 10.000 wa 1, Elect to operating profit of closing Suburban Store. ‘9 Wf Suourcan Store is closed, is contrllaie segment margin shall be eimmated olus ban Store's contribution margin. The effect of cesing Suburban Store to ft of Frodo Baggins, In., is as follows: ‘Contribution margin ~ Suburban 36 000 in @ monthly increase (ome) [MULTIPLE CHOICE] Avoidable direct fixed costs(P-40,000 x %) £30,000) le margin - Su B.6.000 to profit due to tion margin of P 6.000 ase in the contr Urban Store (P48,000 x pit Total decrease in overall proftif Suburbanis cosed _B0,600 5S Froco is considering a pre Store that would not afect i 1ng 2 promotional campaign at Suburban Urban Store, irereans annual pncionl eipense ‘at Suburban Store by P60,000 in erder to increase this store's sales by 10% woud result m a monthy increase (Secrease) in Froco's operating prof dun (‘ourded) of & 215,000) ©. P 7,000 coil P (1.400) D. P 12,000au Short-term Non-routine Decisions The imted resource shall be used '0 produce Blender. BLL the pyg Bender is also subject os marke i The 50.000 machine noun {oo as follows Hours Total Rank] Product Uris] perunit hours 1 er 20,000 | thr. 20.000 2 icMixer_15.000"} 2's. 30.000 bat, 50.000 * (30,000 ts 2 ts) uring shuld produce 2,000 unis of Blender ana 15 00g urchese the remaining units 13,000 units of mixer (ig ¢ units — 15,000 units) from an outside supplier, * 48.09 73. With al ner things constant, it Gandalf Wanufacuring is able t reduce the g materials for en electric mixer to P6 per unit, the company should et A Produce 25,000 electric mixers and purchase all other units as necced, 8. Produce 20.000 blencers and 18,000 elece mixers, and purchase of ey units 2s needed, ©. Produce 20.000 biencers and purchase all other units as needed © 0. Purchase all units as needed, (oma 3 E738 {5 2 The optimal use of 50,000 machine hours if direct mate: electric mixer ig reduced to PS per unit E @ The cirect materials of electric mixer is reduced by PS (ie., P11 — PS), oF teu 5 contribution margin is increased by PS. The new contribution margin 2 each product shall be as follows: = Blender Electric Mixer ibution margin P4 P12 (PT + Ps) urs per unit the. _2 hrs. sn margin perhour Ba Bs ~@) fD 1 50,000 machine hours shail be Used to produce 25,000 unts of ekci 50,000 hours /2 hrs. per unit). The annual demand or electric mit $ ts The remaining 3,000 units (28,000 units - 25,000 uni oar i be purchased from outsice supplier together with the annual demané Retain or replace an old asset? in ee ait 74, At December 31, 2013, Zar Company had a machne wih an original 8 84,000, accumulated depreciation of P60,000, and an astimated salvage Va! oe zero, On Decerter 31, 2013, Zar was considering the purchase of a new Man having @ five-year ie, costing 120,000, ang having an ectimated savage V2" 20,000 ot to ond of ve years. Ins decison conceinng ine posse PC the new machine, Pow men should Zar consider 08 sun ot at OE 2013? Short-term Not-outin Decisions sie ©. 24.000 0. P4003 (eens) a unk cost j hesratt amon a8 cued by eon fo enn sak pe ad machine f P24,000, wih on accumueted dopey, tana cs Mook value, whch serves as the remaining sune seer ton of 7800 he net shoice-tetter “c" Is correct. 24,000 (ie, tI © fue cost Ch depreciable cost of the new machine an incorest te vale ha 'Sasoa 5 MO mesningh reason or ies, nc. has an opportunity t Seque a rew euipment to rese 1s Yate oysing equipment. THe New eqUprren woul con Sere eo : aa ree ah oar erring prea pk ve ea aaa twp ston per year. The present equpment nes a Dox vals o eden ee ter Mf of fNe years. Its Sspesel pce now 6 PSD.00 i worn ee eames vanabte operating costs would De P1260 009 por\eer Cenaaerse fee yore in ta, but horng the bine Value oF money and reeves eealacecve to P400,000.ucvantage. > errepizce due to P150,000 disadvantage Reslacedve to P350,000 advantage Aezrepiace due to P 100,000 disadvantage A 8 c 8 pep) a B 3 s 6 wy z ei 3 3 7 tain an old equipment. 'be replaced if the savings er income derived from the new ‘an old equipmentis snown below: Roan Replace Purchase price 'P900,000 Book 500000 Useful fe (remaining). syeas yee ‘Terminal salvage value o Salvage value - now 50,000 eae ‘operating costs 4,250,000 1,000,000 ual savings in operating costs (1280-000 P000,008) rayne ‘Therefore: Sevings in 6 years (P260,000 x 6 yrs) at Salvage vali oe cavipment amS19 Short-term Non-outine Dec shorsem Nonrouioe be a No one? P77: Total cash inflows cost 5.000 pHa Purchase price 00 090) rato 22509 P_400,009 ne comea"y Net advantage of replacing the old equipment imelevant. It 18 8 sunk cost ang ince the break even volume will not change The dook value of the old asset decision to be made. This analysis does nay “2Mmet i oe eS ae wil ats Pons il SVEN increase by 4 tax effects, 2 sty ten jtomation since the 10% red 76. Chow Foods operates 9 caetera forts empoyees THe CperatOns of he ex ¢ ved. uetOn in break even Yalu sould be require ted cost of P470.000 per month and variable costs of yoii® Cale a ; t a jeraging P1,200,00 per mont 40% of anit to automation since the eduction n breakeven vane wil os em 10%. Cafeteria sales are currenty ‘opportumty to repiace the ci th vending machines Stine vending machines i es! be 40% grester because the vending machines are available 3t all hours, By win vending machines, the company would receive 16% of Spending and avo cafeteria costs. A decision to replace th ‘9 monthly increase (decrease) in operat 77 pass of deciding whether the compeny shoulé shito aeration ernet 2, Inebirndtion set By the Management in determineg anerar ns ee The cone Sgupment iso ede the beaten mee te eae aultmectve breakeven points are as folons Exsting New automation . P(588,000) / ©, B'18.800 (pep) Fixed costs P775,000P892.500 a JuntCM(P30-P15) P__15 B47 (pap_pyy) & 7 Treettecton monthly proft ifthe cafeterias replaced wth vending machnes Breakevenpomtin unis SLL —REEO0 11 A comparative tabulation of data on the two allernatives (cafeteria or vend ner reread ty‘ achines) is shown below: a The company should not change its present equipment because cheno 4 Cafeteria Vending Machines pres ipment would even increase breakeven point by 1% retrer man veaueirg & Sales 1,200,000 . itby at least 10%. Z (P1.2 million x 140%) P1.680,000 = Variable costs 40% of sales - Sellas- is or process further @ product? 2 Fixed costs 470,000 : 7B In the manufacturing process of Drigo Company, an output cali! substance Commission income 18% of sales cisposed of as waste. Recently, the Rese: Department has oiscovered & The short-term effect on profit if the vending machines are used & bilabial Na alata Income from ven¢ machines P1,680,000 x 16%) 268,800 Income from cafeteria: - Contribution margin (P1.2 mition x 60%) 720,000 1m, of which P250,000 can b Fixed costs (470,000) 250.000 allocated to "poo". Net advantage of using the vending machines P.16.800 Which of the amounts are relevant in the decision to dispose or sell ‘poo’ @ 77. Excellent Corp. produces motherboard at a special economic zone in Central Luzo? etergent? is now considering to shift to new automated equipment instead of its pre? f. P20. P6, P14,P260,000. C. PISbilion,P250000 |, faclity. Management was given the mandate to shift it ts break even port wf 8. P20, P6, P14 D. P20, P14, P1.5 bikin. P250,000 recP2) mat ly De improved with @ minimum of 10% reduction in volume. Below are he 73.8 rtinent i pertinent information: « fy ts Televant costs in the sell-or-cispose Soles in unt xxisting With Automation In the short-term decision of whether to Selig pice, oe 800,000 Fen the following data and costs are consceres a sel rice after further processing (final s 3 Variable cost per unit P45 P13 Processing te sees from further processing. The common cost aff point of process further vo peice at sph costs of tu or jl52 ‘Short-term Non-routine Decisions one? Cy sn a Joint procuction process is a sunk eo. trer DecaUS® prOCESSing them further would whether ott osts ond fHEG COB are relevant cost aye rot The relevant costs 720; act eludes in the further processing, PS; ater further processing, Pra nana correct} jonel produces WEEK 16,000 umts ct Product ya fs ean be Sold as 1S OF processed furher Fu es. The cic doi the production of subsequent batches 5 foes nat 79. Coco Company owns a large processing line which segregates co, Components uoon contract wih breaker of the machine. Proses aqornetor and fuel orgy ing price without further processing joning Unt geling price with further processing Juice Shei 200 P1.00 P30 ban Yau soprate week) varetlecostsoflaterprocesing piteoo py ay raize Jus! marufsetutng conavion mage, he tal sen rae Temattyrrer provessing that souk e neues 0.08 003 003 Pea? Bist Poe? Poor ‘The study shows that after further 2 i each week ee gD 100,000 Pplcation of sddional marutactunny grace & P9009 BeP1sh000 (en) Meat | Juice Shell Husk 08 P1200, P400 P200 p20 > The costs of separate processing must be incurred to maximize prot 380 290 195 195, Fused cost of the plant amounts to {2 The costs of separate processing to be incurred chal be the cass cf the producto he product to be processed furtar is tne one that cert '500,000. Interest rate is 12% Which proaue, be processed further. The pr oF facturing process? to the overall proft. Processed further Of the two products. J ge incremental profit of P4.20 per coconut toe processed ‘Aditional pro’ should go through the adgitional mat A Copenut mest only because B Aliprosucts because ali © Coconut mest only because tne business r. |MULTIPLE CHOICE| MULTIPLE CHOICE! a 0 tll res of PA2. GE ce acct wmeemenaise® CGeccountsxrs) praca D None because all will incur losses. (pepe) Incremental cosis of turer processing (400000) _(60.000) Incremental (decremental) profit Bs0.000) 30.000 Product JIi should be processed fur cause t wie P30,004 4 10 process further a product o is whether there 1s an incremen fe an incremental profit. the product lertal profit is incremental sales less incremental cost 'm profit of the business. Its costs of further processing 16 PSO 000, hence, choice-tetter “b” is correct, Questions 81 and 82 are based cn the fllowing information. Meat Juice Shell Whitehall Corporation produces chemicals used tne cleaning ind g.zevous month, Whitehall incurred P500,000 of jit costs in orauers Zit (Final USP ~ USP at spit-off cant) P00 P200 P1,00 P00. ts of AM-12 and 40,000 units of BMA26. WI Less: Aaational processing costs 380 _290 _195 196 ‘method Increase in croft floss) 20 per nt Flank P4720 F090) Floss) P95) Sone To be processes tuna of nat? ee en of AUH2 ation has approached Whitehall to pure pe Beas Yes to /No. NO erfuther processing, The futher processing - Ont Brac! Meas 1 be processed futher because processing gue a0 inerernertal proft M12, which tl 5 ig most aevortagecus? natives is most 2¢ totowing alter oA one of the aii tane Dec c ‘ ‘should process further and sell to Flank if the. persentage. oid C. Whiten atte fat is mos! adventgeces 1 WhicHall Corporson wig iP rome y seat oacause the seling pee of product Ag 2 Choice-letter ‘cis the correct lated as follows P 350 0,000 / 60,000 units) __ 1.0 further processing 5.00 incorrect because P4.50 (ie, P3.00 further processing which disregards an opportunity cost, that have been derived if AN-12 Is sold at spii-off point. Choi because P5.25 is not the optimum basis in determining the off point, The minimum sales price after further processing is P5.00, based o nominal smount, and not P5.25 which is bases on gross profit percentage. g be included inthe basis of cetera $ to preserve the prof that coud be oad 2 splt-off point. Choice 18 covect Because te wy ultimate sales price should be greater than PS.00. + Choies-letter “a" is incorrect because the P3.0 {(P 300,000 x sar109) © 60,000 unis) is only the allocated joint cost to AM-12°" Coens 5 50) is the total u = £2 ‘Assume that Whitehall Corporation agreed to sell AM-12 to Flank Corporaon ft 5.50 per unit after further processing. Ouring the first month of producton, Wntehsl sold 50,000 units with 10.000 units remaining in inventory at the end of the marth hich one of the following statements is correct With respect A. The ope 1st Month was P50,000, and the inventory va B. The opes st month was P50,000 and the inventory value is P45,000. C. The oper month was P125,000, and the inventory is P30,000. O. The opers ‘month was P200.00 and the inventory is P30,000. (emel 62.B ? The correct statement with respect to AM-12. ‘A The charces given refer to both operating profit and inventory value of AM-12. ‘gov ZThe allocated unit cost for AM-12 is P3.00 [(P300,000 x 60/100) / 60,000 tant26 the cost of further processing is P1.50. Therefore; the relevant unit cost of re cscapp eae aA su ‘Short-term Non-outinc Decisions pf 2 PLSD. The coc BO, when yy ait ew 9 eae sc yt Se gag " cetermined as 000 units x P5.50) 275.000 eee Scagtccre Waite vinimum or maximum bid price? 4 Las Engines Company manulsctres engines forme mia equpman ong cost pus bose The Cos! of = parcuer macine mo company ners ea pew Direct materials 400,000 Direct labor 300,000 Overnead Supervi 40,000 se Fringe benefits on direct later 30,000 g 8 24.000 ip 3 22,0007 / = 318.909 a engine were discontinued the production capsiy would be = off. Snould there be a next contract for thie ‘engine, the company should bid a minimum price of mut} A” P816,000 ©. 730,000 8 700,000 D.P770.000. (tecpa) wD 7. The minimum bid price for the next contract imum bid price should at least equal the incremental costs or production plus The chportunty costs, if any. The mcremental costs aie Direct mater 400,000 Direct labor 300,000 ‘Supervisor's salary 40.000 Fringe benefits on direct labor __30.000 Incremental costs PLZ0.090 The costs of depreciation and rental are irelevant costs because ihey are mpbttled to be incurred regardless of whether the bidding is won oF not ‘Mnimum bid price is the incremental costs st P770,000. ippine aimed forces on @ & Power Systems, inc, manufactures jet en: nutectures 18 SStolus basis. The cost of a particular jet engine the company manuisclures Shown below: ers,MULTIPLE CHOICE: ey are only incunrer 125 and the goods are sold (chotce-etter "b” is care 4 16 91 pertain to the following information. Levy Cor ng a stow down m business act t and Septum shutting down its operations during those months ‘he vent as provided the following normal op: P 180 xeoeoo VS 10.000 par went 5.000 por ronth lowing casts are expected tote 200,000 per month 100,000 par set up 40% of total wil remain wil be reduced by 20% Shut down costs amount to A P640 000, ©. P1,240,000 8 Pe2o.000 ©. 1,189 600 39D ? The total shut dow: costs, onthe 12)" Shut down costs are tose sill incurred during the shut cown period 83589 data given, the shut down costs are: jpavovedle {709 over om fied Secunty an 3a ‘ia ub OOSIs nut JOM costs 00.000 42) two (2) montns ig ( C1750 uns 5 10566 units level of sates wher hat own costs (eg the shut down cost we need Safe continued and the oF ) To comput 928 when op: beow Foes costs and expens’ Snut-aoun costs ston margin (P150- PE - P19} Tha computation of the SDP is shown ‘Shutdown point e erat 00.000 + F200 000) x2 months) Pi 209.000 4.186.000 cy hut-scAm costs) UCM 17 PBC) = 2.750 unis To prove. we have. 9 margin (2.750 x PEO} costs and expenses, m continuing operations 220,000 IMULTIPLE CHOICE} ~ Shut down costs, No atierence Wing oF discontinuing the operations, 1s advisable and by 127 © P 60.000. shutdown 2 P 60,000, contnue Continuing operations 600,009) 4, Shut cown costs aces 1,189,000 ‘Net eavantage of continuing the operators B 580.000 ‘Ne:natvely, could be computed a folows:(Topica Quizzer; Short-term Non-routine Decisions TOPICAL QUIZZER UCTIONS Choose tne leter of your best answer. 195. Good luck Ths quiz s 99 1. Sendow Co. is curren FeceWed a Special orcer for 5.000 units of precuet. which normal unt Costs associated with the product are: direct materiel, P6 ‘overnaad, P3: applied ©. va D. production cost plus @ normal ition cost ie proguction cost. 3. Scou: Company nas two sales tertitores-Luzon and VigMin, Financial informaton the 128 for 2013 follows Luzon Visi 860,000 750,000 (243,000) (225.000) (450.000) (325,000) cated common costs (275.000) (175.000) ‘Net income (ics) (88,009) 29,000 Because the company is ina startup stage, corporate management feels that he Luzon sales terntory 1s creating too much of a cash drain on the company até Luzon is discontinued, one sales manager (whose slay S Feiocated to the VisMin territory. By how much woul the Luzon territory 's eliminated? ©. decrease by P267.000 D. decrease by P227,000" per year) wal income change pase by 88,000 B_ increase by P48 000 40,000 Sei 4 K Co. uses 10.000 units of a par in its production process. The costs to make 2 pH are: direct material, P12; cect labor, P25: variable overhead. P13, and appied Met ‘overnead, P30. K Co. has recewved a quote of PSS from a potential supplier fo ms part. IF K Co, buys the part 70 percent of the applied fixed overhead would contr K Co. would be better off by ‘Shors-term Non-routine D E su ont qoprementaculet'e at. & FAO Db te 1 Sey he pa 60.000 to mandtecure the par bp x general incude 4 rear ical Allocated suk costs: costs ost yes. no A res ro eo ae no yes: om yes. yes Ste 5 produces 2 part that has the following costs per unt 6 00 maieral Ps tab 3 arable overnoae 1 Fired overtead 8 Total eu ‘corp can provide the part to Q for P19 per unk. Q Co. has determined that 60 fixed overhead would continue fit purchased the gat. However. no i yen. praby what margin? A Make-P20.000 B. Mako-P50.000 1. Armstrong Co, has 1,000 units in inventory thet had a production cost of P3 per ough normal channels due to a signticant \d be reworked al 2 total cost of P23,000 and sald fer P28,000. Ancther alternative is to sel the unts to a junk dealer for P3,600. The eievant cost for Armstrong to consider in making i's decision fs A. P45,000 of original product costs reworking the units eworking the units. . 28,000 for seting the units tothe junk Gesier.” ©. Buy-P19.009 D. Buy-P49,009" & Handy Comes, inc, makes and sells brushes and combs. It can sell al of eiher Preduetit can make. The folowing data are pertinent to each respective procuct. Brushes Combs Units of output per machine hour 8 2» Seling price per P1200 -PA.00 Product cost per ur ct materiat P1090 P120 labor 2.00 oan: Variable overhead 9.80 0.08 {TOPICAL QUIZZER}S45 Short-tern} Non-routine Decisions ; Shing Total fhed overhead is P360,000. The company has 40.000 mach, available for production. What sales mix will maximize profits? 5 hy A. 220,000 brushes and 0 combs B. O brushes and 800,000 combs © 160,000 brushes and 600,000 cords: D. 252,630 brushes and 252,520 combs 9 Boston Shoe Codbie's has been asked to submit a bid on supplying 4,999 itary éress boots to the Pantagon. The company’s costs per pair of bom tl follows: 8 ate ag Direct materi PB Direct labor 6 Variable overhead 3 Variable selling cost (commission) 3 Fixed overnead (allocated) 2 Fixed selling and administrative cost 4 Assuming that there wouls be no cemmission on ths potential sale, the lones pag the firm can bid is some price greater than A P23 B P20. 10. P Co. has only 26,000 hours of machine time each month to manufaciuie ts twp products. Product X has a coninbution margin ct PS0, and ‘contribution margin of P64. Pr Y requires 8 hours of machi ©. 210,000 ©. 200,000." B. 240,000, 11, Relay Corporation menufactures batons. Relay can manufacture 300,000 batons a year at a variable cost of P750,000 and a fixed cost of P450,000. Based on Relays ‘addition, a special order wat iscount off the regular price. The unit relevant cost per unit for Relay's decision s C. P3.00, D. Paoo- Questions 12 and 13 are based on the following information: R Corp. seis a produ for P18 per unit, and the standard cost card for the product shows the following C25! Total Bio ITOPICAL Quizzer} 15 Inda Corporation has P200,000 Short-term Non-roatine De rat would be the minum sae ecial order? " c. P5.40 1B. Pteco 12s sufficient idle capacity to produce the 1,000 units. if R wants to Fang profit by PS,600, what would & charge as a per-unk selng c. P11.00 DB. P1860" f¢ is trying to decide whether it should Keep ke existing car washing e that has techr advantages (wnich translate lon on each machne follows: Old machine New machine : 9,000 20,000 se : aN on 'B. P20,000. D. P18,000." t processing casts and is studying whether to Information about J and K tolows. ‘beyond the sj process J and K tout ans Ks 1 ‘Tons produced 8.000 separable variable processing costs beyond spitett 64,000 100.000 Sing rice per ton at split-oft 85 = price per ton after additional processing — total company income, what should Product z S: spiit-off , qu hatepitof ——,_—_~Process beyond splt-ff y © Process beyond spitort Sell at spit-off . 2 D. Process beyond split-off Process beyond splt-off 2 ‘edsptod : Thank you for taking the | quizzer! 3 Me M 4 «pg va'eu'98 00 37 8 SR G8e0 Leter-Answers m O9b ‘art ‘Deb ‘azh 'aHsBOr‘OF WE ———