Income for the firm to p10000 what sales price must

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income for the firm to P10,000, what sales price must be quoted for each of the 5,000 units? A.23.50 B.24.50 C.27.50 D.34.00 Number 34 (DIFFERENTIAL COSTS ANALYSIS) Dolly Company has 3 divisions: R, S, and T. Division R's income statement shows the following for the year ended December 31: Sales P1,000,000 Cost of goods sold (800,000 ) Gross profit P 200,000 Selling expenses P100,000 Administrative expenses 250,000 (350,000 ) Net loss P (150,000 ) Cost of goods sold is 75 percent variable and 25 percent fixed. Of the fixed costs, 60 percent are avoidable if the division is closed. All of the selling expenses relate to the division and would be eliminated if Division R were eliminated. Of the administrative expenses, 90 percent are applied from corporate costs. If Division R were eliminated, Dolly’s income would A. Increase by 150,000 B. Decrease by 75,000 C. Decrease by 155,000 D. Decrease by 215,000
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MANAGEMENT ADVISORY SERVICES Page 11 Numbers 35, 36, 37 and 38 ( DIFFERENTIAL COSTS ANALYSIS) Schundel Hair Care Company produces shampoo with conditioner. This is the company’s only product, which it sells under the name “Shamcon.” The manufacturing cost data for Shamcon are as follows: Quantity required Current market price Materials: per 1,000-ml bottle per ml Chem 1 4 ml P0.54 Chem 2 3 ml 0.36 Chem 3 2 ml 0.20 Direct labor: 2 hours per bottle @ P3 per hour Factory overhead: Variable overhead P2.00 per direct labor hour Fixed overhead 4.00 per direct labor hour Clever Company, owner and operator of a chain of hotels, asked Schundel Hair Care Company to submit a bid for 500 boxes of Shamcon. Each box will contain 24 bottles. Per Clever’s specifications, its order should be different in chemical composition from the regular Shamcon. According to Schundel Company’s production manager, Clever’s specifications can be met if an additional chemical, Chem 4 would be used. Schundel Company has 60,000 ml of this chemical. Chem 4 was used by the company in one of its brands that it decided to eliminate. The remaining inventory of Chem 4 was not sold or discarded because it does not deteriorate and the company has adequate space for its storage. Schundel Company can sell Chem 4 at the prevailing market price of P0.40 per ml less P0.10/ml selling and handling costs. Clever’s order would require 5 ml of Chem 4 per bottle. The company has a stock of Chem 5. This was used by Schundel Hair Care for its manufacture of another product that is no longer being produced. Chem. 5, which cannot be used in Shamcon, can be substituted for Chem 1 on a one-for-one basis without affecting the quality of the Clever order. There is no problem about the supply of Chem 1. At present, the company has 20,000 ml of Chem 5 in its inventory, which has a salvage value of P6,000. The production of the Clever’s order would require the same direct labor hours per bottle as in the regular Shamcon. However, at present, the company has only 20,000 direct labor hours available. The Clever order can be produced if the workers would work overtime, although an overtime premium of 30% of the regular rate should be paid.
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