Alternative Differencial cost to make

Make Buy
Direct materials ₱ 12,500.00 ₱ - ₱ 12,500.00
Direct labor ₱ 17,500.00 ₱ - ₱ 17,500.00
Variable overhead ₱ 7,500.00 ₱ - ₱ 7,500.00
Fixed overhead ₱ 2,500.00 ₱ - ₱ 2,500.00
Rent Income ₱ 6,000.00 ₱ - ₱ 6,000.00
Purchase cost ₱ - ₱ 38,750.00 ₱ (38,750.00)
Total relevant cost ₱ 46,000.00 ₱ 38,750.00 ₱ 7,250.00
It is cheaper by 9,500 to make the component internally or in house

Alternative Differencial cost to make

Make Buy
Direct materials ₱ 64,000.00 ₱ - ₱ 64,000.00
Direct labor ₱ 16,000.00 ₱ - ₱ 16,000.00
Variable overhead ₱ 8,000.00 ₱ - ₱ 8,000.00
Fixed overhead ₱ 32,000.00 ₱ - ₱ 32,000.00
Purchase cost ₱ - ₱ 120,000.00 ₱ (120,000.00)
Total relevant cost ₱ 120,000.00 ₱ 120,000.00 ₱ -
It is cheaper by 500 to buy the component externally

Special order problem Accept Reject Differential benefit to accept

Price $ 9.00 $ - $ 9.00
Direct materials $ 3.00 $ - $ 3.00
Direct labor $ 2.80 $ - $ 2.80
Variable overhead $ 1.50 $ - $ 1.50
Increase in operating income $ 1.70 $ - $ 1.70
Operating income will increase by $ 34,000.00 If special order is accepted

Segmented income
Audiomatronics Inc.
Segmented Income Statement
For the coming year
MP3 players Smartphones Total
Sales $ 400,000.00 $ 290,000.00 $ 690,000.00
Less: variable expenses
Variable cost of goods sold $ 200,000.00 $ 150,000.00 $ 350,000.00
Variable selling expense $ 20,000.00 $ 14,500.00 $ 34,500.00
Contribution margin $ 180,000.00 $ 125,500.00 $ 305,500.00
Less direct fixed expenses
Direct fixed overhead $ 30,000.00 $ 20,000.00 $ 50,000.00
Direct selling & administrative expense $ 10,000.00 $ 15,000.00 $ 25,000.00
Segment margin $ 140,000.00 $ 90,500.00 $ 230,500.00
Less common fixed expenses
Common Fixed overhead $ 100,000.00
Common fixed selling & administrative $ 20,000.00
Operating income $ 110,500.00

Keep or drop product line problem Keep Drop Differential amount to keep
Sale $ 150,000.00 $ - $ 150,000.00
Less variable expense $ 140,000.00 $ - $ 140,000.00
Contribution margin $ 10,000.00 $ - $ 10,000.00
Less advertising $ 10,000.00 $ - $ 10,000.00
Cost of supervisory $ 35,000.00 $ - $ 35,000.00
Total relevant benefit (loss) $ (35,000.00) $ - $ (35,000.00)
The difference is $ 35,000 in favor of dropping the

Keep or drop with complementary effect

New contribution magrin $ 250,000.00 $ 25,000.00 $ 225,000.00
New contribution magrin $ 320,000.00 $ 25,600.00 $ 294,400.00
$ 519,400.00
Keep Drop Differential amount to keep
Contribution margin $ 580,000.00 $ 519,400.00 $ 60,600.00
Less Advertising $ 30,000.00 $ 20,000.00 $ 10,000.00
Cost of supervisory $ 112,000.00 $ 77,000.00 $ 35,000.00
Total $ 438,000.00 $ 422,400.00 $ 15,600.00

Sell or further processing decision prob

 The two alternatives are make the component
internally or purchase it externally

Relevant costs of making the components internally include direct materials,

direct labor, vairable overhead. While the relevant cost of purchasing externally
only includes the purchase price

fit to accept
The two alternatives are keep the roofing tile line
or drop it.

Relevant costs of keeping