Solve for the requirements and choose the letter that best answers the question. Show your solutions.

Nucup Company operates two stores in Luzon - one in Manila and another in Quezon City. The operating results for October 2020, which are representatives of all months, are condensed as follows:

	Manila Store	Quezon City Store	Total
Sales	P 400,000	P 600,000	P 1,000,000
Variable Cost	160,000	420,000	580,000
Contribution Margin	P 240,000	P 180,000	P 420,000
Direct Fixed Costs	100,000	200,000	300,000
Store Margin	P 140,000	P (20,000)	P 120,000
Indirect Fixed Costs, Allocated based on Peso Sales	20,000	30,000	50,000
Operating Income	P 120,000	P (50,000)	P 70,000

Additional Information:

• Thirty percent (30%) of each store's direct fixed cost cannot be eliminated even if either store is closed.
• If the Quezon City Store is closed, the Manila Store's sales would decrease by 20%. However, closing the Manila Store would not affect the Quezon City Store's sales.

1. If the objective is to maximize total company profit, which store should be closed? a. Manila Store b. Quezon City Store c. Both stores should be closed d. Neither of the two stores should be closed
2. If the Quezon City Store is closed, the company's total income would increase (decrease) by a. P (88,000) b. P 40,000 c. P 180,000 d. P 100,000
3. To improve the profitability of the Quezon City Store, Nucup Company is considering a promotional campaign that would not affect the Manila Store. The campaign would cost P300,000 annually, and it is expected to increase the Quezon City Store's sales by 20%. The promotional campaign would result in a monthly increase (decrease) in Nucup Company's operating income of a. P 36,000 b. P (264,000) c. P 11,000 d. P (180,000)
4. Assume that at present, one-half of the Quezon City Store's sales are from items sold at variable cost to attract customers to the store. Nucup Company is considering to stop selling such items. This action would reduce the remaining sales by 20% and the direct fixed costs to 85%. These changes would not affect the Manila Store. The company's decision to eliminate the items sold at variable cost would result in a monthly increase (decrease) in its operating income by a. P (36,000) b. P 134,000 c. P (30,000) d. P (6,000)
5. Assume that the company is considering a promotional campaign for the whole company, which will: increase sales in both stores by 20% double the total indirect fixed costs What is the effect of this promotional campaign to Nucup Company's operating income? a. P 34,000 increase b. P 84,000 increase c. P 150,000 increase d. P 266,000 decrease

The following information pertains to the four products of De Boton Corporation. Direct materials and direct labor are readily available. The company can acquire as much of these resources as it requires. However, the company is limited to a maximum of 1,200 machine hours per month:

	Product 1	Product 2	Product 3	Product 4
Selling price per unit	P 75	P 90	P 100	P 125
Variable cost per unit	P 35	P 55	P 50	P 80
Machine hours required per unit	8	5	25	3

1. Assuming that there is no market limit for any of the products, the company should produce and sell

a. all the products b. product 4 only c. product 3 only d. products 1 and 2 only

2. Assume that the maximum demand (market limit) for each product are as follows:

Product 1	500 units
Product 2	2,300 units
Product 3	no limit
Product 4	4,250 unit

What is the best product combination? a. 250 units of Product 4 and 300 units of Product 2 b. 250 units of Product 4 and 90 units of Product 2 c. 400 units of Product 4 d. 48 units of Product 3

3. A company plans to discontinue a division with a P50,000 contribution margin. Overhead allocated to the division is P80,000 of which P35,000 cannot be eliminated. The effect of this discontinuance on the company's income before tax is a/an

a. increase of P5,000 b. decrease of P5,000 c. increase of P30,000 d. decrease of P30,000

4. Bautista Corporation presently operating at 90% of capacity, has been offered a new order at a special price of P7.90 per unit, requiring 25% of capacity. At present, there is no other use for the idle capacity of 10%, but if the special order were accepted, the additional 15% capacity required shall be subcontracted at a cost of P8.00 per unit, that is P0.50 more than the company's variable manufacturing cost. Should the special order be accepted?

a. Yes, because the special order has a positive contribution margin of P0.10 per unit. b. Yes, because the special order has a positive contribution margin of P0.15 per unit. c. No, because the special price of P7.90 is lower than the subcontracting cost of P8.00. d. No, because the special order cannot be produced entirely using the company's plant capacity.

5. Faith Corporation has considerable excess capacity. During the month, it received a special order at a price much lower than its regular price. The special order's cost sheet shows the following:

Materials	P 8,000
Labor	12,000
Applied factory overhead costs: Variable	35,000
Applied factory overhead costs: Fixed	20,000

The applied fixed factory overhead cost includes an allocated P5,000 for in-house design costs, although no in-house design cost will be done for the special order. Instead, the job will require the use of external designers for which the company will incur P7,000. What is the total amount to be included in the calculation to determine the minimum acceptable price for the special order?

a. P62,000 b. P55,000 c. P77,000 d. P57,000