Reference no: EM132960072
Question -
Q1. Arturito Company was approached by the Jordan Brand to purchase 10,000 pairs of shoes for P550. The company currently operates at 45,000 pairs. The maximum capacity of Arturito is 50,000 pairs. If arturito will accept the order, it will need to stop some of their operations. The shoes normally sell for P600. Costs pertaining to the production are as follows:
Manufacturing costs are as follows:
Direct material per unit P200
Direct labor per unit 180
Variable overhead per unit 50
Fixed overhead per unit 30
Period costs are as follows
Variable selling costs P20 per unit
Fixed administrative costs P450,000
If the company will accept the order:
It will not incur any selling costs.
Variable overhead of P12 per unit will not be incurred.
Exportation costs of P150,000 will be incurred.
Assuming you are the managerial accountant of Arturito Company, what will you suggest?
a. Reject the special order because there is an incremental loss of P200,000
b. Reject the special order because there is an incremental loss of P80,000
c. Reject the special order because there is an incremental loss of P830,000
d. Accept the special order because there is an incremental benefit of P70,000
Q2. WalangLabel Company is a liquor company, the business has not been performing well this last few months due to the liquor ban imposed by the government. The company is considering whether it should shutdown temporarily for three months. The selling price and other costs of operating are presented below:
Selling price P500
Variable manufacturing costs P280 per unit
Variable selling costs P60 per unit
Monthly Fixed costs:
Manufacturing costs P250,000
Selling costs P120,000
Administrative costs P125,000
If the company will temporarily close it would incur P150,000 in retrenchment costs and P80,000 in reopening costs. Manufacturing costs would not be incurred and Administrative costs of P50,000 would be avoided per month if they decide to shutdown. The company expects to sell 100 units per month if it would continue to operate.
What is the shutdown point in sales?
a. P7,500,000
b. P3,656,250
c. P7,187,500
d. P2,875,000