1) Star Boy Company sells a single product, Product X. Last year, sales revenue amounted to...
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1) Star Boy Company sells a single product, Product X. Last year, sales revenue amounted to P700,000 and total variable and fixed costs amounted to P420,000 and P210,000, respectively. The products were sold at P7 per unit A study was made by the sales manager. It disclosed that the unit selling price could be increased by 20% but with a corresponding decrease by 15% of the volume sold. If Star Boy Company incorporates the changes in its next year forecast, what is the income for Product X? 2) Chelsea Company manufactures a computer component. Currently, the costs per unit consists of direct materials at P20; direct labor at P200; variable overhead at P100; and fixed overhead at P160. Adrian Company approached Chelsea with an offer to sell 4,000 units of the component for P440 per unit. If Chelsea accepts the proposal, P1,000,000 of the fixed overhead will be eliminated. Should Chelsea make or buy the component? 3) Heaven Company is operating at 70% capacity. The plant currently purchase raw material X1 from an outside supplier at a purchase price of P154 each. Studies show that the price is expected to increase in the near future. The plant manager assesses whether it should make its own raw material X1. Direct materials needed would amount to P56 per unit, direct labor would amount to P42 per unit and overhead is 250% of direct labor cost, 60% of which is fixed. If the manager chooses to manufacture its own raw material X1, what is the gain or loss for each component? 4) Camote Company produces and sells three products as follows: Sales Variable cost Separable fixed cost Allocated fixed cost Product AA 40,000 Product BB Product CC 30,000 25,000 19,000 15,000 10,000 12,000 7,000 8,000 7,000 8,000 5,000 The company lost its lease and must move to a smaller facility. As a result, total allocated fixed costs will be reduced by 30%. However, one of its products must be discontinued in order for the company to fit in the new facility. Which product line should the Company discontinue? 5) What is the expected net profit after the appropriate product has been discontinued? 6) The income statement of product Hammer, one of the several product being sold Tony Company shows a sales revenue of P184,000 and a total cost and expenses amounting to P211,600. Fixed costs amounted to P86,480, P49,680 of which are unavoidable regardless of whether the product will be dropped or not. What is the product elimination point (shutdown) point (round to nearest hundred thousand)? 7) If in the next year, it is estimated that the revenue from Product Hammer would only be P100,000, should the company continue or drop the product line? 8) Lucifer Company sells its product A at a selling price of P42 per unit. Lucifer's costs per unit based on the full capacity of 200,000 units are as follows: Direct materials P Direct labor Overhead 8.00 10.00 12.00 Overhead costs were 40% fixed. A special order offering to buy 40,000 units were received from a foreign distributor. The only selling costs that would be incurred amounts to P6 per unit for shipping (as oppose to P12 per unit on regular customers). Lucifer has sufficient existing capacity to manufacture the additional units. What is the minimum selling price per unit that the Company may accept? 1) Star Boy Company sells a single product, Product X. Last year, sales revenue amounted to P700,000 and total variable and fixed costs amounted to P420,000 and P210,000, respectively. The products were sold at P7 per unit A study was made by the sales manager. It disclosed that the unit selling price could be increased by 20% but with a corresponding decrease by 15% of the volume sold. If Star Boy Company incorporates the changes in its next year forecast, what is the income for Product X? 2) Chelsea Company manufactures a computer component. Currently, the costs per unit consists of direct materials at P20; direct labor at P200; variable overhead at P100; and fixed overhead at P160. Adrian Company approached Chelsea with an offer to sell 4,000 units of the component for P440 per unit. If Chelsea accepts the proposal, P1,000,000 of the fixed overhead will be eliminated. Should Chelsea make or buy the component? 3) Heaven Company is operating at 70% capacity. The plant currently purchase raw material X1 from an outside supplier at a purchase price of P154 each. Studies show that the price is expected to increase in the near future. The plant manager assesses whether it should make its own raw material X1. Direct materials needed would amount to P56 per unit, direct labor would amount to P42 per unit and overhead is 250% of direct labor cost, 60% of which is fixed. If the manager chooses to manufacture its own raw material X1, what is the gain or loss for each component? 4) Camote Company produces and sells three products as follows: Sales Variable cost Separable fixed cost Allocated fixed cost Product AA 40,000 Product BB Product CC 30,000 25,000 19,000 15,000 10,000 12,000 7,000 8,000 7,000 8,000 5,000 The company lost its lease and must move to a smaller facility. As a result, total allocated fixed costs will be reduced by 30%. However, one of its products must be discontinued in order for the company to fit in the new facility. Which product line should the Company discontinue? 5) What is the expected net profit after the appropriate product has been discontinued? 6) The income statement of product Hammer, one of the several product being sold Tony Company shows a sales revenue of P184,000 and a total cost and expenses amounting to P211,600. Fixed costs amounted to P86,480, P49,680 of which are unavoidable regardless of whether the product will be dropped or not. What is the product elimination point (shutdown) point (round to nearest hundred thousand)? 7) If in the next year, it is estimated that the revenue from Product Hammer would only be P100,000, should the company continue or drop the product line? 8) Lucifer Company sells its product A at a selling price of P42 per unit. Lucifer's costs per unit based on the full capacity of 200,000 units are as follows: Direct materials P Direct labor Overhead 8.00 10.00 12.00 Overhead costs were 40% fixed. A special order offering to buy 40,000 units were received from a foreign distributor. The only selling costs that would be incurred amounts to P6 per unit for shipping (as oppose to P12 per unit on regular customers). Lucifer has sufficient existing capacity to manufacture the additional units. What is the minimum selling price per unit that the Company may accept?
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Answer rating: 100% (QA)
Answer 1 Income for Product X Given data Sales revenue P700000 Total variable costs P420000 Total fixed costs P210000 Selling price per unit P7 First lets calculate the current income for Product X To... View the full answer
Related Book For
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins
Posted Date:
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