Instructions a Determine whether the company should discontinue operating the B

Instructions a determine whether the company should

This preview shows page 5 - 7 out of 9 pages.

Instructions (a) Determine whether the company should discontinue operating the B Division. (b) If the company had discontinued the division for 2008, determine what net income would have been. PROBLEM NO. 12 (SPECIAL ORDER) Smooth Brew Company manufactures cappuccino makers. For the first eight months of 2008, the company reported the following results while operating at 80% of plant capacity: Sales (50,000 units) P9,000,000 Cost of goods sold 5,400,000 Gross profit 3,600,000 Operating expenses 2,400,000 Net income P1,200,000 An analysis of costs and expenses reveals that variable cost of goods sold is P95 per unit and variable operating expenses are P35 per unit. In September, Smooth Brew receives a special order for 3,000 machines at P135 each from a major coffee shop franchise. Acceptance of the order would result in P2,000 of shipping costs but no increase in fixed expenses. Instructions (a) Prepare an incremental analysis for the special order. (b) Should Smooth Brew accept the special order? Justify your answer. PROBLEM NO. 13 (SPECIAL ORDER) Vincent Company supplies schools with floor mattresses to use in physical education classes. Vincent has received a special order from a large school district to buy 400 mats at P40 each. Acceptance of the special order will not affect fixed costs but will result in P800 of shipping costs. For the first 6 months of 2008, the company reported the following results while operating at 70% capacity: Sales (25,000 units) P1,250,000 5 | P a g e
Image of page 5
Management Accounting II RF LIM Differential Analysis/Relevant Costing Cost of goods sold 980,000 Gross profit 270,000 Operating expenses 170,000 Net income P 100,000 Cost of goods sold was 75% variable and 25% fixed; operating expenses were 70% variable and 30% fixed. Instructions (a) Prepare an incremental analysis for the special order. (b) Should Vincent Company accept the special order? Justify your answer. PROBLEM NO. 14 (SPECIAL ORDER) Paulsen Company produced and sold 20,000 units of product and is operating at 80% of plant capacity. Unit information about its product is as follows: Sales price P70 Variable manufacturing cost P45 Fixed manufacturing cost (P300,000 ÷ 20,000) 15 60 Profit per unit P10 The company received a proposal from a foreign company to buy 4,000 units of Paulsen Company's product for P50 per unit. This is a one-time only order and acceptance of this proposal will not affect the company's regular sales. The president of Paulsen Company is reluctant to accept the proposal because he is concerned that the company will lose money on the special order. All fixed costs are allocated to individual products. Instructions Prepare a schedule reflecting an incremental analysis of this proposal and indicate the effect the acceptance of this order might have on the company's income. PROBLEM NO. 15.1 (SPECIAL ORDER) Turner, Inc. budgeted 10,000 widgets for production during 2008. Turner has capacity to produce 12,000 units. Fixed factory overhead is allocated using ABC. The following estimated costs were provided: Direct materials (P6/unit) P 60,000 Direct labor (P15/hr × 2 hrs./unit) 300,000 Variable manufacturing overhead (P3/unit) 30,000 Fixed factory overhead (P4/unit) 40,000 Total P430,000 Cost per unit P43.00 Instructions Answer each of the following independent questions: (a)
Image of page 6
Image of page 7

You've reached the end of your free preview.

Want to read all 9 pages?

  • Fall '15
  • Bulusan Company, Adrenal Company

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes