Problem 1

Vincent Company supplies a component part used in the manufacture of cellphones. Vincent has received a special order from a large manufacturer in Greenhills to buy 500 units at P40 each. Acceptance of the special order will not affect fixed costs but will result in P800 of shipping costs.

For the first 6 months of 2018, the company reported the following operating results while operating at 80% capacity:

Sales (25,000 units) 1,250,000

less: Cost of goods sold 980,000

Gross profit 270,000

Less: Operating expenses 170,000

Net Income 100,000

Cost of goods sold was 80% variable and 20% fixed; operating expenses were 70% variable and 30% fixed.

Instructions: Show analysis and recommendation in good form

1. What is the incremental analysis for the special order.

2. Should Vincent Company accept the special order? Justify your answer.

Problem 2

X Company uses 30 units of Part A per month in the production of its main product. The manufacturing cost per unit of Part A are as follows:

Material 2,000

Handling Cost 200

Direct Labor 10,000

Factory Overhead (40% fixed) 20,000

Total 32,200

Handling cost is applied at 10% of cost of direct materials and/or any purchased parts.

Y Company, a producer of Part A has offered to supply the part for X at P 24,000 per unit. If X accepts Y's offer, the resulting idle facility may be used to produce another product which is expected to earn P 100,000 per month.

Required: Should the X make Part A or buy it from Y?

Problem 3

Brave Company manufactures and sells two products. Relevant per unit data concerning each product are given below:

Standard Deluxe

Selling Price 50 75

Variable cost 30 30

Machine Hours 1.6 3.75

Market limit 600 100

Instructions: Show analysis and recommendation in good form

1. Compute the contribution margin per unit of the limited resource for each product.
2. If 1,200 additional machine hours are available, which product should be manufactured? How much contribution margin will the company earn from this product? (Disregard market limit)
3. Considering the market limit, how many units of each product should be produced? How much contribution margin will the company earn from this combination?
4. Recommendation