MAS PROBLEMS 2018.doc

# Schundel hair care companys policy is to price new

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Schundel Hair Care Company’s policy is to price new products at 130% of full manufacturing cost.

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MANAGEMENT ADVISORY SERVICES Page 12 35. If Schundel Company bids this month for the special one-time order of 500 boxes of the product, the special order’s total direct materials cost will be A. 73,944 B. 61,680 C. 68,880 D. 56,880 36. If Schundel Hair Care Company bids this month for the special one-time order of 500 boxes of the product, the special order’s total relevant conversion cost will be A. 123,600 B. 219,600 C. 120,000 D. 216,000 37. If the company’s policy is to price new products at 130% of full manufacturing cost, what is the bid price per unit for this one-time special order of Clever Company? A. 19.55 B. 6.91 C. 29.95 D. 23.80 38. What will be the total variable manufacturing costs for the subsequent, recurring 500-box orders? A. 180,480 B. 373,464 C. 287,280 D. 191,280 Numbers 39 and 40 (DIFFERENTIAL COSTS ANALYSIS) Jane Corporation produces wood glue that is used by furniture manufacturers. The company normally produces and sells 10,000 gallons of the glue each month. White Glue is sold for P280 per gallon, variable costs is P168 per gallon, fixed factory overhead cost totals P460,000 per month, and the fixed selling costs totals P620,000 per month. Labor strikes in the furniture manufacturers that buy the bulk of White Glue have caused the monthly sales of Jane Corporation to temporarily decrease to only 15% of its normal monthly volume. Jane Corporation’s management expects that the strikes will last for about 2 months, after which, sales of White Glue should return to normal. However, due to the dramatic drop in the sales level, Jane Corporation’s management is considering to close down its plant during the two-moth period that the strikes are on. If Jane Corporation will temporarily shut down its operations, it is expected that the fixed factory overhead costs can be reduced to P340,000 per month and that the fixed selling costs can be reduced by P62,000 per month. Start-up costs at the end of the shut-down period would total P56,000. Jane Corporation uses the JIT system, so no inventories are on hand. 39. The shut down point in units is A. 2,750.00 .
MANAGEMENT ADVISORY SERVICES Page 13 B. 9,642.86 C. 3,250.00 D. 1,100.00 40. At the sales level of only 30% of the normal volume, should the company continue operating or shut down temporarily for two months? A. Continue, because the expected sales is above the shutdown point . B. Shut down, because the expected sales is above the shutdown point. C. Continue, so that the shutdown costs may be avoided. D. Shut down, because the shutdown costs is less than the contribution margin under continued operations. Number 41 (DIFFERENTIAL COSTS ANALYSIS) Spikey Company produces two products: Pat and Chin. The projected income for the coming year, segmented by product line, follow: Pat Chin Total Sales P300,000 P2,500,000 P2,800,000 Less variable expenses 100,000 500,000 600,000 Contribution margin P200,000 P2,000,000 P2,200,000 Less direct fixed expenses 28,000 1,500,000 1,528,000 Product margin P172,000 P 500,000 P 672,000 Less common fixed cost 100,000 Operating income P 572,000 The selling prices are P30 for Pat and P50 for Chin.

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