MAS SOLUTIONS TO PROBLEMS SOLUTIONS 2018.docx

# 36labor total required time 12000 bottles x 2 hours

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36.Labor: Total required time – 12,000 bottles x 2 hours 24,000 hours Labor cost at regular rate (24,000 hours x P3) P72,000 Overtime premium (24,000 – 20,000) x P3 x 30% 3,600 Total labor cost P75,600 Factory overhead – variable (24,000 hours x P2) 48,000 Total relevant conversion cost P123,600 A The overtime premium is part of labor cost, not of overhead cost, because the overtime work is attributable to a particular job.

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MANAGEMENT ADVISORY SERVICES Page 6 The total fixed factory overhead is assumed to remain constant whether or not the special order is accepted, hence, irrelevant . 37. Materials cost (from Item #35) P 56,880 Variable conversion cost (from Item #36) 123,600 Fixed factory overhead (24,000 hours x P4) 96,000 Full manufacturing cost P276,480 ÷ Number of bottles ordered (500 boxes x 24) 12,000 Full cost per bottle P 23.04 130% Bid price per unit P 29.95 C 38.Materials: Chem 1 12,000 bottles x 4 ml x P0.54 P25,920 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 24,000 P67,680 Variable conversion cost (from Item #36) 123,600 Total variable manufacturing costs P191,280 D For subsequent orders, the company will have to buy all the required materials because by this time, the inventory of Chem 4 and Chem 5 would have been fully utilized in the first order. 39. Fixed costs under continued operations (for 2 months): Factory overhead (P460,000 x 2 months) P 920,000 Selling costs (P620,000 x 2 months) 1,240,000 Total P2,160,000 Less shutdown costs*: Factory overhead (P340,000 x 2 months) P 680,000 Selling costs ([P620,000 – P62,000] x 2 months)1,116,000 Start-up costs 56,000 1,852,000 Difference P 308,000 Divide by CM per unit (P280 – P168) ÷ P112 Shutdown point in units 2,750 units A 40 . Answer A 41. PAT CHIN Cont. margin P200,000 P2,000,000 ÷ units (P300k ÷ P30) 10,000 50,000 CM per unit P 20 P 40 X change in units 25,000 (5,000) Change in CM P500,000 (P200,000) Increase in CM (P500k – P200K) P300,000 Less incremental fixed cost 245,000 Increase in profit P 55,000 C 42. Special price P58 Less relevant costs: Variable manufacturing P40 Overtime cost 8 48 Contribution margin P10 x Units ordered 50,000
MANAGEMENT ADVISORY SERVICES Page 7 Incremental operating income if order is accepted P500,000 B 43. Revenue from the special order (50,000 units x P58) P2,900,000 Less relevant costs: Variable manufacturing (50,000 x P48) P2,400,000 Opportunity cost: lost CM from regular customers (20,000 units x [P100 – 40]) 1,200,000 3,600,000 Decrease in operating income if order is accepted P700,000 C 44. Product Y should be sold at the split-off point, while Products X and Z should be processed further: X Y Z Units sales price if processed further P100 P60 P75 Unit sales price at split-off 80 45 60 Increase in sales value if processed further P 20 P15 P15 Less additional processing cost 15 20 10 Profit (loss) if processed further P 5 (P 5 ) P 5 The most profitable action is to sell Product Y at the split-off point and process further Products X and Z. Total gross profit is computed as follows: Sales: Product X (5,000 units x P100)P500,000 Y (3,000 units x P 45) 135,000 Z (2,000 units x P 75) 150 ,000 P785 ,000 Less costs: Additional processing cost: Product X (5,000 units x P15) P 75,000 Z (2,000 units x P10) 20,000 Joint product costs 200 ,000 P295 ,000 Gross profit: (P785,000 – 295,000) P490,000 D 45. Purchase price P24 Relevant unit cost to make: Variable (P20 – P5) P15 Avoidable fixed cost 2 17 Loss per unit if keypads are purchased P 7 D 46.

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