ASSIGNMENT 04

(30 Points)

Name: ____________________________________

PROBLEM SOLVING

1. ABC Mfg. Co. buy and sells its lone product on which the following data are given:

Sales volume per annum …………………………….…………. 25,000 units

Unit selling price ……………………………………………. P10.00
Production cost per unit:
Direct materials ………………………………………… P3.50
Direct labor …………………………………………… 2.50
Variable factory overhead ……………………………… 2.00
Fixed factory overhead (P25,000/20,000 units) …….. 1.25

Variable operating expense per unit P1.00

Fixed operating expenses (P10,000/20,000 units) 0.50

A special order is received for P2,000 units from a remote market at P7.90, FOB
destination. Packing and shipping costs are estimated at P1,200.

Decision making: (show computation)

a. Should the order be accepted? Why?

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b. What is the BEP price or sales cut-off price for the special order?
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 2. Use the data given in ABC Mfg. Co. (No. 1) and assume that Golden Mfg. Company has
offered to produce the product (25,000 units) for P8.00 per unit. If the offer is accepted,
savings in fixed factory overhead are estimated at 40%

Decision making: (show computation)

a. Should ABC continue making or just buy its products? Why?
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b. How much is the purchase cut-off price?
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Computation:

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