1. PQ Corporation produces two products, P and Q. P sells for P4.00 per unit; Q sells for P5.25 per unit. Variable costs for P and Q are respectively, P2.50 and P2.95. There are 3,600 direct labor hours per month available for producing one of the two products. Total Fixed manufacturing overhead is allocated at P600 per month. Product P requires 2 direct labor hours and Product Q requires 2.5 direct labor hours. Compute the following: a) Best product combination b) What is the peso amount of the maximum operating income? 2. Middleton Corporation manufactures two styles of lamps, a Bedford Lamp and Lowell Lamp. The following per unit data are available: Bedford Lamp Sale price Variable costs Machine hours required Lowell Lamp P25 P17 2 P35 P23 4 Total fixed costs are P30,000 and Middleton can sell a maximum of 10,000 units of each style of lamp annually. Machine hour capacity is 25,000 hours per year. a) Determine the number of units of each style of lamp that Middleton should produce to maximize operating income b) What is the peso amount of the maximum operating income? 3. Matt Ching sells three products, Skinny, Bony and Thinny. Matt, the proprietor, is concerned about the losses incurred by Thinny, and is considering to discontinue its production and sales. Sales and costs data about Matt's three products are as follows: Skinny Bony Thinny Total Sales price per unit P5 P7 P9 P21 12 Variable cost per unit 2 3 7 12 5 Contribution Margin 3 4 2 9 7 Fixed Cost per unit income 1 2 3 6 6 3 1 Fixed costs are allocated among the three products based on the floor area they occupy. Matt is thinking that if she would eliminate Thinny, its loss of P1 would likewise be eliminated thereby increasing her total profit from P3 to P4. Is Matt's analysis correct? Prove your answer. 4. Tsong| Go operates a chain of bookstores with branches in Manila, Quezon City and Makati. A summary of operating results of the three branches are as follows: Manila Makati Quezon City Total Sales 300 400 500 1,200 Variable 120 160 200 480 Fixed 50 140 70 260 Allocated home office costs. 90 120 140 350 Tsong is considering to close the Makati branch but if he would push through with her plan, the amount allocated to Makati would just be absorbed by the other branches. Would Tsong continue operating the Makati Branch? Why? Manila Total Sales 300 500 800 Variable 120 200 320 Fixed 50 70 70 260 Allocated home office costs 90 120 140 350