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SEATWORK. Compute for the amounts asked by each problem. Final answers should be written on the space provided.

Erasures are strictly not allowed.


PROBLEM 1: Scooter Company produces three products from a joint process costing P100,000. The following
information is available:
Cost to Selling price
Product Units Selling price
process after further
type produced at split off
further processing
A 10,000 P 3.50 P 7,000 P 4.00
B 20,000 4.00 3,000 4.50
C 30,000 2.00 9,000 2.50
1. If a “sell as is or process further” analysis was made correctly, what amount of incremental income will Scooter
Company earn by processing further the right products? P _______________

2. If all three products are currently processed further before being sold, how higher (lower) would income be if the
three products are rather sold at split off? P _______________

PROBLEM 2: The Table Top Model Corporation produces three products, Tic, Tac and Toc. The owner desires to reduce
production load to only one product line due to prolonged absence of the production manager. Depreciation expense
amounts to P600,000 annually and other fixed operating expenses amount to P660,000 per year. The sales and variable
costs data for the three products are:
Tac Tic Toc
Sales P 6,600,000 P 5,300,000 P10,800,000
Variable costs (3,800,000) (1,700,000) (8,900,000)
1. Which product line must be retained and what is the opportunity cost of selecting such product line?

PROBLEM 3: Knox Company uses 12,000 units of a part in its production process. The costs to make a part are: direct
material, P12; direct labor, P25; variable overhead, P13; and applied fixed overhead, P30. Knox has received a quote of
P55 from a potential supplier for this part. If Knox buys the part, 60% of the applied fixed overhead would continue.

1. What is the total relevant cost to manufacture relating to this “make or buy” decision? P _______________

2. If Know choose to manufacture the part, Knox would be better off (worse off) by: P _______________

PROBLEM 4:Holt Industries has two sales territories-East and West. Financial information for the two territories is
presented below:
East West
Sales P 980,000 P 750,000
Direct costs:
Variable (343,000) (225,000)
Fixed (450,000) (325,000)
Allocated common costs (275,000) (175,000)
Net loss P (88,000) P 25,000
Because the company is in a start-up stage, corporate management feels that the East sales territory is creating too much
of a cash drain on the company and it should be eliminated. If the East territory is discontinued, twosales manager with
salary of P40,000each per year will be relocated to the West territory.

1. What would be Holt’s net income after the East territory is eliminated? P _______________

PROBLEM 5: Emerald Corporation has been manufacturing 5,000 units of Part 10541, which is used in the manufacture
of one of its products. At this level of production, the cost per unit of manufacturing Part 10541 is as follows:
Direct materials P 2.00
Direct labor 8.00
Variable overhead 4.00
Fixed overhead applied 6.00
Total P 20.00
Hamilton Company has offered to sell Emerald 5,000 units of Part 10541 for P19.00 a unit. Emerald has determined that it
could use the facilities currently used to manufacture Part 10541 to manufacture Part RAC and generate an operating
profit of P4,000. Emerald has also determined that 2/3 of the fixed overhead applied will not continue if Part 10541 is
purchased from Hamilton.

1. To determine whether to accept Hamilton’s offer, the net relevant costs to make are: P _______________

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