Problem 1

a. Incremental Revenue (40 x1,000) Php 40,000.00

Incremental Cost
Varibale Manufacturing (24 x 1,000) (24,000.00)
Varibale Selling (8 x 1,000) (8,000.00)
Incremental Contribution Margin 8,000.00

b. Yes, the company should produce the special order and it will increase the income by Php 8,000.00

c. without SO with SO
Revenues
(16,000 x 60) Php 960,000.00
(15,000 x 60) 900,000.00
(3,000 x 40) 120,000.00
Varibale Cost
Manufacturing
(16,000 x 24) (384,000.00)
(18,000 x 24) (432,000.00)
Selling
(16,000 x 8) (128,000.00)
(18,000 x 8) (144,000.00)
CM 448,000.00 444,000.00
Fixed Cost
Manufacturing (160,000.00) (160,000.00)
Selling and Admin (120,000.00) (120,000.00)
Operating IncomePhp 168,000.00 164,000.00

d. No, if the decision is based on quantitative factors, the compay should not produce the special order due to decrea
cial order due to decrease in income by Php 4,000.00
a. Sales Php 60,000.00
Variable Cost (20,000.00)
Contribution margin 40,000.00
Direct fixed cost (12,500.00)
Segment margin 27,500.00
Allocated common cost (17,500.00)
Operating income Php 10,000.00

b. Yes. Dropping the Nuts Division increases the firm's income by Php 5,000.00
 Make Buy
Purchase price 1,680,000.00
Fixed Costs 200,000.00
Rental income (20,000.00)
Production Cost 1,750,000.00
Total 1,750,000.00 1,860,000.00
Difference 110,000.00

The company should produce the product internally for it will generate a savings of Php 110,000.000
110,000.000