MANAGEMENT ADVISORY SERVICES
Page
5
32.
Product X
Product Y
CM per unit
P 50
P 64
÷ hours per unit
5
8
CM per hour
P 10
P
8
80% of capacity must be applied to Product X, the product with the higher CM
per hour.
Product X (25,000 x 80%) ÷ 5 = 4,000 units x P50P 200,000
Product Y (25,000 x 20%) ÷ 8
=
625 units x P64
40,000
Total contribution margin
P240,000
B
33.
Loss
P15,000
Desired profit
10,000
Required increase in profit
P25,000
÷ number of units
5,000
Profit per unit
P 5.00
Add production costs:
Materials (P6.00 – P1.50)
P 4.50
Labor
10.00
Variable overhead
3.00
Variable selling exp (P2 – P1)
1.00
18.50
Sales price per unit
P23.50
A
34.
Avoidable sales
P1,000,000
Avoidable costs:
Var. CGS (P800,000 x 75%)
P600,000
Fixed CGS (P800,000 – P600,000) x 60%120,000
Selling expenses
100,000
Admin. exps. (P250,000 x 10%)
25,000
845,000
Decrease in income
P155,000
C
35.The special order is for 500 boxes of 24 bottles each or a total of 12,000 bottles.
Materials costs will be:
Chem 1:
Total required – 12,000 bottles x 4 ml48,000
ml
Available Chem 5 that can be substituted
for Chem 1, 20,000 ml, salvage value… *
P
6,000
Balance of Chem 1 required
(48,000 ml – 20,000 ml) x P0.54
15,120
Chem 2:
12,000 bottles x 3 ml x P0.36
12,960
Chem 3
12,000 bottles x 2 ml x P0.20
4,800
Chem 4
12,000 bottles x 5 ml x (P0.40 – P0.10)*
18,000
Total materials cost
P56,880
D
*
The relevant cost of existing stocks is equal to their salvage value that will
not be
realized if the stocks are used in the Clever order.