Management Advisory Services 34.

35.
A. Increase P46,000
C. P8,000
By Franklin Agamata 36. D. Lose P3.00 per unit
37. D. P190,000
Chapter 10: Short-term Non-routine
Decisions Accept or reject a special sales order
38. C. Accepted the offer since he could have P300 contribution margin
39. A. P14
Basic concepts
40. D. Fixed overhead has been allocated and additional lease cost has been ignored
1. B. Determination of product price
41. A. Yes, due to incremental income of P48,000.
2. C. Potential effect on the decision
42. A. Accept the special order due to P185,000 incremental income.
3. D. Considers all variable and fixed cost as they change with each alternative
43. B. Yes, since it will contribute P1.8 million margin.
decision.
44. C. P160,000 increase.
4. B. Disposal price of the old equipment
45. B. Result in less than normal contribution margin.
5. B. Irrelevant for marginal analysis
46. A. Depreciation
6. D. Maximize the contribution margin per unit times the number of units sold
47. B. P30,000 increase
7. B. Why the sales of a particular product increased.
48. C. Acceptance of the order will not affect regular sales.
49. D. The marginal cost of producing the order
Make or buy
50. B. Depreciation
8. C. Alternative, Buy; Amount, P35,000
51. C. Variable
9. D. P4
52. A. P1,830,000
10. B. Make due to savings of P500,000
53. B. P50
11. D. No, because making the blades would save Dana Company by P2,500
54. C. P1,080,000
12. B. P15
55. A. P60
13. C. Avoidable fixed cost
56. D. P11.86
14. D. Fixed overhead that will continue even if the part is bought from an outside
57. A. P7.05
vendor
15. D. Fixed overhead that will continue even if the part is bought from an outside
Drop or continue a division, department, process, projects or activity
16. C. Avoidable fixed costs.
58. B. P30,000 lower (segment margin of dropped segment)
17. A. Buy, because there will be savings of P3.6 per hose.
59. C. Increase of P6,000 (segment loss of dropped segment)
18. C. Yes, because you will earn P15,000 more.
60. A. Retained product “Tac”; opportunity cost is P4.6 million.
19. B. P72,000
61. D. P500,000 increase
20. B. Zero
62. B. Four and Five
21. D. Manufacture, due to advantage of P19,200 per unit
63. D. P25,000
22. A. Continue to produce exotic oils at P1,170,000 relevant costs against purchase
64. A. P (10,800)
cost of P1,260,000
65. B. P (1,400)
23. B. Total variable cost of producing of P35.00 per unit.
66. B P (1,200)
24. B. Produce the freezable ice bag due to P25,000 advantage
25. A. P85,000
Maximization of scare resources
26. A. Avoidable fixed costs
67. A. A
27. B. Involves the analysis of avoidable costs.
68. C. Product B since it has the higher contribution margin per machine hour.
28. D. Zero
69. D. Highest contribution margin per unit of the constraining resource.
29. B. P20,000
70. B. Product B
30. B. P6.75
71. A. Variable costs plus any opportunity costs of idle facilities.
31. C. Future costs that differ among the alternative courses of action plus all
72. B. Produce 20,000 blenders and 15,000 electric mixers and purchase all other
qualitative factors that cannot be measured in numerical terms.
units as needed.
32. A. P3,500 less than acquiring the purchased software package
73. A. Produce 25,000 electric mixers and purchase all other units as needed.
33. C. Increase P9,600.
Management Advisory Services
74. A. Variable costs plus any opportunity costs of idle
facilities.

Retain or replace an old asset

75. C. P24,000
76. D. P18,800
77. A. Replace due to P400,000 advantage.
78. B. Not shift since the break-even volume will even
increase by 1% with the automation.

Sell-as-is or process further a product

79. B. P20, P6, P14
80. A. Coconut meat only because it will give
incremental profit of P4.20 per coconut.
81. B. P90,000
82. C. Whitehall should process further and sell to Flank
if the total selling price per unit after further
processing is greater than P5.00
83. B. The operating profit last month was P50,000 and
the inventory value is P45,000.

Bid price
84. D. P770,000
85. D. P385,000
86. B. P40,750
87. D. P241,000

Shut down or not

88. B. All except items 5 & 6

Scrap or rework defective units

89. D. P50,000
90. A. P3,000
91. A. Scrap, P5,950

Indifference Point
92. C. At 6,000 units
93. C. 37,500
94. C. P33,750,000
95. B. P750,000

Miscellaneous topics
96. D. Produce Product y and market at P80.000 if the
fixed selling and distribution expenses cannot be
eliminated.
97. B. P30,000
98. C. P19,800
99. B. Sunk cost
100.A. P1,320
101.D. I, II and III
102.C. P 2,156,000
103.D. P2.00
104.B. P6.40
105.D P29,000