{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

chapter-9 - This Accounting Materials are brought to you by...

Info icon This preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
This Accounting Materials are brought to you by www.everything.freelahat.com -CHAPTER 9 SHORT-TERM NON-ROUTINE DECISIONS [Problem 1] a. Sunk costs = 2,000 units x P35 = P70,000 b. Relevant costs from reworking (2,000 x P5) P10,000 Relevant costs from selling-as-is none Inflows from reworking [(P20 – P5) x 2,000 units] P30,000 Inflows from selling as is (2,000 x P9) 18,000 Advantage of reworking P12,000 [Problem 2] a. Relevant cost to make the part P75.00 Relevant cost to buy the part (65.00) Advantage of buying the part per unit P10.00 Total advantage of buying the parts (90,000 x P10) P900,000 b. Relevant cost to make (P20 + P30 + P13) P63.00 Relevant cost to buy (65.00) Advantage of making per unit P(2.00) Total advantage of making (90,000 units x P2.00) P180,000 [Problem 3] Make_ Buy__ Purchase price (8,000 x P18) P144,000 Var prod costs (8,000 x P14) P112,000 Avoidable Fx costs (P48,000 x 60%) 28,800 CM – new product __ 32,000 1) Relevant costs P140,800 P112,000 2) Savings P 28,800 [Problem 4] (1) (a) Decrease in DL and VOH (P16 x 20% x 75,000) P240,000 / yr. Decrease in supervision (P8 x 20% x 75,000 x 10%) 12,000 / yr. Rental income 150,000 / yr. Increase in annual profit - buy alternative P402,000 Increase in profit in 5 yrs. (P402,000 x 5) P2,010,000 Purchase price ( 600,000) Salvage value 50,000 Net increase in inflows – buy alternative P1,460,000
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
This Accounting Materials are brought to you by www.everything.freelahat.com It would be advisable for the business to buy a new equipment and gain a net cash inflow of P1,460,000 in 5 years. (b) Cost to make – old equipment Unit var cost (P6 + P12 + P4) P 22 Avoidable Fx OH (P8 x 20%) 1.60 P 23.60/part Cost to buy 20.00 Savings from buying P 3.60 /part Total savings from buying (75,000 x P3.60) P270,000 It would be advisable for the company to buy the parts from an outside supplier and save P270,000. (c) Make Buy Purchase price (75,000 x P20) P1,500,000 Direct materials (75,000 x P6) P 450,000 Direct labor (75,000 x P12 x 80%) 720,000 Variable OH (75,000 x P4 x 80%) 240,000 Avoidable fixed OH (75,000 x P8 x 20% x 90%) 108,000 . Relevant costs P1,518,000 P1,500,000 Savings P 18,000 It would be advisable for the business to buy the parts and save P18,000. 2) The alternatives have the following relevant costs: Maintaining the old equipment (75,000 x P23.60) P1,770,000 Buying the part [(75,000 units x P20) – P150,000] 1,350,000 Using the new equipment [(75,000 units x P20.24) – P150,000] 1,368,000 The best alternative is to buy the parts from an outside supplier because it has the lowest relevant cost of P1,350,000. [Problem 5] Make _ __Buy__ Purchase price (10,000 x P18) P180,000 Var prod cost (P55,000 + P45,000 + P20,000) P120,000 Avoidable Fx OH (10,000 x P4) 40,000 Rental income (15,000) Net relevant costs P160,000 P165,000 Savings in making P 5,000
Image of page 2
This Accounting Materials are brought to you by www.everything.freelahat.com [Problem 6] 1. Make Buy Purchase price (50,000 x P60) P3,000,000 Variable production costs (50,000 x P50) P2,500,000 Available fixed overhead 400,000 _________ Relevant costs P2,900,000 P3,000,000 Savings from making P 100,000 The company should opt to make the pumps and save P100,000 a year. 2. Make Buy Purchase price (35,000 x P60) P2,100,000 Variable production costs (35,000 x P50) P1,750,000 Avoidable fixed overhead 400,000 Relevant costs P2,150,000 P2,100,000 Savings from buying P 50,000 Marikina Store Company should buy the pumps from Biñan Air Supply and save P50,000 a year.
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern