PROBLEM NO. 1

ABC Company installs home security systems. Two of ABC's systems, the MCU 100 and MCU 900, have these characteristics:

Design Specifications	MCU 100	MCU 900
Video cameras	1	3
Video monitor	1	1
Motion detectors	5	8
Floodlights	3	7
Alarms	1	2
Wiring	700 ft.	1,100 ft.
Installation	16 hrs.	26 hrs.

Cost data for both Systems
Video cameras	P150/ea
Video monitor	P75/ea
Motion detectors	P15/ea
Floodlights	P8/ea
Alarms	P15/ea
Wiring	P0.10/ea
Installation	P20/hr

The MCU 100 sells for P810 installed, and the MCU 900 sells for P1,350 installed.

Questions:

1. What is the current cost of MCU 100?
2. What is the current cost of MCU 900?
3. What is the profit margin of MCU 100?
4. What is the profit margin of MCU 900?
5. If MCU 100 will drop the price to P750, what will be its profit margin?
6. If MCU 900 will increase the price to P1,390, what will be its profit margin?

PROBLEM 2

The ABC Corporation manufactures cabinets in two operations- machining and finishing. It provides the following information.

Machining Finishing

Annual capacity 100,000 units 80,000 units

Annual production 80,000 units 80,000 units

Fixed operating costs (excluding direct mat.) P6,400,000 P4,000,000

Fixed operating costs per unit produced P80 per unit P50 per unit

Each cabinet sells for P720 and has a direct material cost of P320 incurred at the start of the machining operation. ABC has no other variable costs. ABC can sell whatever output it produces.

Questions:

1. ABC is considering using some modern jigs and tools in the finishing operation that would increase annual finishing output by 1,000 units. The annual cost of these jigs and tool is P300,000. How much is the net benefit (net loss) of ABC if they acquire these tools?
2. The production manager of the Machining Department has submitted a proposal to do faster setups that would increase the annual capacity of the Machining Department by 10,000 units and cost of P50,000 per year. How much is the net benefit (net loss) of ABC if they implement the change?

PROBLEM 3

ABC Company produces and sells recordable CD and DVD packs. Revenue and cost information relating to the products follow:

CD DVD

Selling per pack P8.00 P25.00

Variable expenses per pack P3.20 P17.50

Traceable fixed expenses per year P138,000 P45,000

Common fixed expenses in the company total P105,000 annually. Last year the company produced and sold 37,700 CS packs and 18,000 DVD packs.

Questions:

1. What is the total contribution margin of CDs sold last year?
2. What is the total contribution margin of DVDs sold last year?
3. What is the product line segment margin of CDs sold last year?
4. What is the product line segment margin of DVDs sold last year?
5. What is the net income of the company?