Reference no: EM132939232
Problem 1 - 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 P2,000
Handling costs 200
Direct Labor 10,000
Factory Overhead (40% fixed) 20,000
Total P 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 2 - Brave Company manufactures and sells two products. Relevant per unit data concerning each product are given below:
Product Standard Deluxe
Selling price P50 P75
Variable costs P30 P30
Machine hours 1.6 3.75
Market Limit 600 100
Required - 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. Prepare a recommendation.