1. Gaudie Company manufactures and sells T-shirts. Last year, the shirts were sold for P7.50 each,...

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1. Gaudie Company manufactures and sells T-shirts. Last year, the shirts were sold for P7.50 each, and the variable cost to manufacture them was P2.25 per unit. The company needed to sell 20,000 shirts to break even. The net income last year was P5,040. The company's expectation for the year coming include The selling price of the T-shirts will be P9.00 Variable cost to manufacture will increase by one-third Fixed costs will increase by 10% - The income tax rate of 40% will be unchanged the following: Required: Determine the number of T-shirts that must be sold to break even in the coming year. 2. Gallardo Company makes three products. The cost data for these three products is as follows: Selling price Variable costs Product A P10 8 Product B P20 Product C P40 12 16 Total annual fixed costs are P850,000. The firm's experience has been that about 20 percent of sales come from product A, 60 percent from B, and 20 percent from C. Required: Compute break-even point in units of products A, B, and C 3. Michael Company sells a product for P9.00 which has a variable manufacturing cost of P3.00 per unit. Last year, the company needed to sell 20,000 shirts to break even. Assuming the company is subject to a 40% tax rate. Required: Compute the required sales in pesos if the company wishes to earn P22,500 profit after tax for the coming year. 4. In early July, Mike purchased a $70 ticket to the December 15 game of the Chicago Titans. (The Titans belong to the Midwest Football League and play their games outdoors on the shore of Lake Michigan.) Parking for the game was expected to cost approximately $22, and Gottfried would probably spend another $15 for a souvenir program and food. It is now December 14. The Titans were having a miserable season and the temperature was expected to peak at 5 degrees on game day. Mike therefore decided to skip the game and took his wife to the movies, with tickets and dinner costing $50. The sunk cost associated with this decision situation is $_. 5. Chef Ian Inc., which has excess capacity, received a special order for 4,000 units at a price of $15 per unit. Currently, production and sales are budgeted for 10,000 units without considering the special order. Budget information for the current year follows. Sales Less: Cost of goods sold Gross margin $190,000 145,000 $ 45,000 Cost of goods sold includes $30,000 of fixed manufacturing cost. If the special order is accepted, the company's income will increase/(decrease) by: 6. Rio Corporation is composed of five divisions, and each division is allocated a share of Rio overhead to make divisional managers aware of the cost of running the corporate headquarters. The following information relates to the Warren Division: 1. 2. Product A: units units Product B: units Product C: units 3. 4. 5. 6. Increase/(decrease) Increase/(decrease) 7. On the Decision column, write (1) if the product should be sold at split-off point or (2) if the product should be processed further. Product Decision ABC Sales Variable operating costs Traceable fixed operating costs Allocated corporate overhead $7,500,000 5,100,000 1,900,000 300,000 If the Warren Division is closed, 100% of the traceable fixed operating costs can be eliminated. Required: What will be the impact on Rio's overall profitability if the Warren Division is closed? 7. Eraton Company produced three joint products at a joint cost of $100,000. These products were processed further and sold as follows: Product Sales Additional Processing Costs A $245,000 $200,000 B 330,000 300,000 C 175,000 100,000 The company has had an opportunity to sell at split-off directly to other processors. If that alternative had been selected, sales would have been: A, $56,000; B, $28,000; and C, $56,000. The company expects to operate at the same level of production and sales in the forthcoming year. Required: Consider all the available information and assume that all costs incurred after split-off are variable. Which products should be processed further and which should be sold at split-off? 1. Gaudie Company manufactures and sells T-shirts. Last year, the shirts were sold for P7.50 each, and the variable cost to manufacture them was P2.25 per unit. The company needed to sell 20,000 shirts to break even. The net income last year was P5,040. The company's expectation for the year coming include The selling price of the T-shirts will be P9.00 Variable cost to manufacture will increase by one-third Fixed costs will increase by 10% - The income tax rate of 40% will be unchanged the following: Required: Determine the number of T-shirts that must be sold to break even in the coming year. 2. Gallardo Company makes three products. The cost data for these three products is as follows: Selling price Variable costs Product A P10 8 Product B P20 Product C P40 12 16 Total annual fixed costs are P850,000. The firm's experience has been that about 20 percent of sales come from product A, 60 percent from B, and 20 percent from C. Required: Compute break-even point in units of products A, B, and C 3. Michael Company sells a product for P9.00 which has a variable manufacturing cost of P3.00 per unit. Last year, the company needed to sell 20,000 shirts to break even. Assuming the company is subject to a 40% tax rate. Required: Compute the required sales in pesos if the company wishes to earn P22,500 profit after tax for the coming year. 4. In early July, Mike purchased a $70 ticket to the December 15 game of the Chicago Titans. (The Titans belong to the Midwest Football League and play their games outdoors on the shore of Lake Michigan.) Parking for the game was expected to cost approximately $22, and Gottfried would probably spend another $15 for a souvenir program and food. It is now December 14. The Titans were having a miserable season and the temperature was expected to peak at 5 degrees on game day. Mike therefore decided to skip the game and took his wife to the movies, with tickets and dinner costing $50. The sunk cost associated with this decision situation is $_. 5. Chef Ian Inc., which has excess capacity, received a special order for 4,000 units at a price of $15 per unit. Currently, production and sales are budgeted for 10,000 units without considering the special order. Budget information for the current year follows. Sales Less: Cost of goods sold Gross margin $190,000 145,000 $ 45,000 Cost of goods sold includes $30,000 of fixed manufacturing cost. If the special order is accepted, the company's income will increase/(decrease) by: 6. Rio Corporation is composed of five divisions, and each division is allocated a share of Rio overhead to make divisional managers aware of the cost of running the corporate headquarters. The following information relates to the Warren Division: 1. 2. Product A: units units Product B: units Product C: units 3. 4. 5. 6. Increase/(decrease) Increase/(decrease) 7. On the Decision column, write (1) if the product should be sold at split-off point or (2) if the product should be processed further. Product Decision ABC Sales Variable operating costs Traceable fixed operating costs Allocated corporate overhead $7,500,000 5,100,000 1,900,000 300,000 If the Warren Division is closed, 100% of the traceable fixed operating costs can be eliminated. Required: What will be the impact on Rio's overall profitability if the Warren Division is closed? 7. Eraton Company produced three joint products at a joint cost of $100,000. These products were processed further and sold as follows: Product Sales Additional Processing Costs A $245,000 $200,000 B 330,000 300,000 C 175,000 100,000 The company has had an opportunity to sell at split-off directly to other processors. If that alternative had been selected, sales would have been: A, $56,000; B, $28,000; and C, $56,000. The company expects to operate at the same level of production and sales in the forthcoming year. Required: Consider all the available information and assume that all costs incurred after split-off are variable. Which products should be processed further and which should be sold at split-off?