Reference no: EM132980960

Question - Len Manufacturing Company incurred the following costs during its current production of 2,500 teddy bears, alongside its office and administrative operations:

Direct materials used, P80 per unit

Indirect materials, P40,000 (P16 per unit)

Direct labor, 3 hours per teddy bear at P60 per hour

Indirect labor, P80,000 (1 hour per unit, P32 per hour)

Office salaries, P354,000

Depreciation - manufacturing equipment, P3,700

Depreciation - office equipment, P4,800

Rent of factory facility - P80,000

Rent of office and selling space - P92,000

The management decided to conduct review of costs to restructure operations based on its strategic position. The following were the results of their developmental researches and analysis:

The purchasing department was able to look for a supplier which can reduce direct material cost to P65 per unit and reduce total indirect materials by P2 per unit. The management has evaluated that these materials are of the same quality as what they are currently using.

Another supplier is known to offer P90 per unit of higher quality raw materials with no change in indirect labor.

Upon review of in-house time and motion studies, direct labor can be reduced to 2.50 hours per teddy bear by eradicating nonvalue-adding activities. Total number of employees will not be changed and indirect labor will not be changed.

All office salaries, depreciation, and rent costs are fixed.

Relating to Len Manufacturing Company's current production, how much are total product costs and period costs?

A. P770,000 and P534,500, respectively.

B. P650,000 and P654,500, respectively.

C. P853,700 and P450,800, respectively.

D. P1,304,500 and P-0-, respectively.