CASE #1 Damili ti Amianan, Inc. manufactures iconic superhero figurines. All figurines are approximately the same size, but some are ceramic and others are fancy, with black leather capes and a metallic armour. Management is considering producing only the fancy figurines because the rate of return on sales is so much higher than it is on the ceramic figurines. The company's total production overhead is P5,017,500. Some additional data follow: Revenues Direct cost Production (units) Machine hours Direct labor hours Number of inspections Required: Ceramic P15,000,000 Fancy 8,250,000 1,500,000 #16,800,000 8,750,000 350,000 200,000 50,000 34,500 153,625 1,000 6,500 a. Damili ti Amianan, Inc. has consistently used machine hours to allocate overhead. Determine the profitability of each line of figurines, and decided whether the company should stop producing the ceramic figurines. b. The cost accountant has determine that production overhead cost can be assigned to separate cost pools. Pool #1 contains P1,260,000 of overhead cost of which the most appropriate cost driver is machine hours; Pool #2 contains #2,257,500 of overhead costs for which the most appropriate cost driver is direct labor hours; and Pool # 3 contains 1,500,000 of overhead cost of which the most appropriate cost driver is number of inspections. Compute the overhead cost that should be allocated to each type of figurine using this methodology. c. Discuss what management decision should be. CASE #2 Tweety Fish makes small bird houses that sell for $25 each. The company's current level of production and sales is 120,000 units. In addition to #430,500 of fixed manufacturing overhead and 159,050 of fixed administrative expenses, the following per-unit cost have been determined for each bird house: Direct material Direct labor #6.00 3.00 Variable manufacturing overhead 0.80 Variable selling expense 2.20 Total variable cost P12.00 Required: a. Prepare a variable costing income statement at the current level of production and sales. b. Calculate the unit CM in Peso and the CM ratio for a bird house. c. Determine the BEP in number of bird houses. d. Calculate the Peso BEP using the CM ratio. e. Determine Tweety Fish's MOS in units, in sales peso, and as a percentage. f. Compute the company's degree of operating leverage. If sales increase by 25%, by what percentage will before tax income increase? g. How many bird houses will the company need to sell to earn #996,450 in before-tax income? h. If the company wants to earn P657,800 after tax and is subject to a 20% tax rate, how many units must be sold? i. How many bird houses would need to be sold to break even fi Tweety Fish's fixed manufacturing cost increased by #7,865? (use the original data) j. The company has received an offer from a Brazilian company to buy 4,000 bird houses at #20 per unit. The per-unit variable selling cost of the additional units will be P2.80 (rather than P2.20), and #18,000 of additional fixed administrative cost will be incurred. This sale would not affect domestic sales of their costs. Based on quantitative factors alone, should Tweety Bird accept this offer