AC 102 – Managerial Accounting

Finals Quiz
Name: ______________________________________

Problem 1
A certain business is operating at 90% capacity and is currently purchasing a part that is being used in its
manufacturing operations for P15 per unit. The unit cost for the business to make the part is P20,
including fixed costs, and P12, not including fixed costs. If 30,000 units of the part are normally
purchased during the year but could be manufactured using unused capacity, what would be the
amount of differential cost, increase or decrease, from making the part rather than purchasing it? Note:
Answer must be in this format (e.g., "50,000 increase" or "50,000 decrease").

Problem 2
It costs P450,000 to make 15,000 units of a part in this plant. This cost includes material of P90,000,
direct labor of P120,000, variable overhead of P15,000, and P225,000 in fixed overhead inclusive of
P45,000 in depreciation and common overhead allocation of P150,000. The balance is for the section
supervisor's salary. The part can be purchased for P20 a unit. If the part is purchased, the space released
can be rented for P65,000. If the part is purchased, the company will? Note: Answer must be in this
format (e.g., "Lose 50,000" or "Gain 50,000").

Problem 3
Iran Company needs 20,000 of a certain part to use in its production cycle. The following information is
available:

Cost to Iran to make the part:

Direct materials P4
Direct labor 16
Variable overhead 18
Fixed overhead applied 10
Cost to buy the part from the Syria Company P36

If Iran buys the part from Syria Co., Iran could not use the release facilities in another manufacturing
activity. 60% of the fixed overhead applied will continue regardless of what decision is made. In deciding
whether to make or but the pay, what are the total relevant costs to make the part? Note: Answer must
be in this format (e.g., "100,000").

Problem 4
You have been approached by a foreign customer who wants to place an order for 15,000 units of
Product Z at P22.50 per unit. You currently sell this item for P39 per unit, and the item has a cost of P29
per unit. Further analysis reveals that you will not be paying sales commission of P2.50 per unit on this
sales and its packaging requirement will save you an additional P1.50 per unit. However, the additional
graphics required on this job will cost you P30,000. Note also that fixed costs amounting to P400,000 for
the production of 50,000 units will not change. You decided to accept this order but another customer
who buys an average of 2,000 units for the period wants to pay you P22.50 rather than the regular price
of P39 per unit. Accepting the special order, the amount of profit will? Note: Answer must be in this
format (e.g., "Increase by 50,000" or "Decrease by 50,000").

Problem 5
WRX Company has received a special order for 300 units of product X for P6 per unit. It usually sells for
P9.50 per unit with a cost of P7.50 per unit inclusive of 75 centavos per unit as sales commission that
will not be paid on this order. The cost also includes P3 in manufacturing overhead, two-third of which is
for the fair share of depreciation, rent, utilities, and supervisor's salary. Assuming that excess capacity is
available, and this order requires a mold that costs P150, accepting the order will increase? Note:
Answer must be in this format (e.g., "Profit by 500" or "Loss by 500").
Problem 6
The cost to manufacture an unfinished unit is P40 (25% fixed). The selling price per unit is P50. The
company has unused production capacity and has determined that units could be finished and sold for
P65 with an increase in variable costs of 40%. What is the additional net income/loss per unit to be
gained by finishing the unit? Note: Answer must be in this format (e.g., "P1.00").

Problem 7
Stellar Company has three products: X, L, and M and data are given below:

Demand CM Time
Product X 100 P30 15 mins
Product L 80 P20 5 mins
Product M 60 P30 10 mins

Assuming that there are 2,425 minutes available in each machine, how many units of X, L, and M should
be produced? Note: Answer must be in this format (e.g., "X, 30; L, 20; M, 40").

Problem 8
Data regarding four different products manufactured by an organization are presented below. Direct
material and direct labor are readily available from the respective resource markets. However, the
manufacture is limited to a maximum of 3,000 machine hours per month:

Product A Product B Product C Product D

Selling price per unit P15 P18 P20 P25
Variable cost per unit 7 11 10 16
Units produced per machine hour 3 4 2 3

What is the product that is the most profitable for the manufacturer in this situation? Note: Answer
must be in this format (e.g., "Product X").

Problem 9
Omisego Company has two devisions - OM and MG. The divisions have the following revenues and
expenses:
OM MG
Sales P720,000 P350,000
Variable costs 370,000 240,000
Traceable fixed costs 130,000 80,000
Allocated common costs 120,000 50,000

The management at Omisego is pondering the elimination of the MG Division for the past several years.
If the MG division were eliminated, its traceable fixed costs could be avoided. The total common costs
would be unaffected by this decision. Given these data, the elimination of the MG division would result
in an overall company operating income of? Note: Answer must be in this format (e.g., "10,000").

Problem 10
Wink Company produces and sells three products as follows:
W N K
Sales P200,000 P150,000 P125,000
Separable fixed costs 60,000 35,000 40,000
Allocated fixed costs 35,000 40,000 25,000
Variable costs 95,000 75,000 50,000

The company lost its lease and must move to a smaller facility. As a result, total allocated fixed costs will
be reduced by 40%. However, one of its products must be discontinued in order for the company to fit
in the new facility. Since the company's objective is to maximize profits, what is the expected net profit
after the appropriate product has been discontinued? Note: Answer must be in this format (e.g.,
"10,000").