Question 212 pts

Blonde, Inc., is considering dropping a certain product line if it does not have a margin
of safety higher than 14.0%. The breakeven sales are P153,500, and the margin of
safety is P26,500. Based on this information, the controller has recommended that
Blonde keep this product line. Did the controller make the appropriate decision?

Group of answer choices

Yes, since the margin of safety ratio of 14.7% is better than 14.0%.
No, since the margin of safety ratio of 17.3% is not better than 14.0%.
Yes, since the margin of safety ratio of 17.3% is better than 14.0%.
No, since the margin of safety ratio of 14.7% is not better than 14.0%.
Question 222 pts
Jordan Company budgeted sales of 400,000 calculators at P40 per unit last year.
Variable manufacturing costs were budgeted at P16 per unit, and fixed manufacturing
costs at P10 per unit. A special order for 40,000 calculators at P23 each was received
by Jordan in March. Jordan has sufficient plant capacity to manufacture the additional
quantity without incurring any additional fixed manufacturing costs; however, the
production would have to be done without some of the features, hence, it is estimated
we can avoid P3 in production cost per calculator. Acceptance of the special order
would not affect Jordan’s normal sales and no selling expenses would be incurred.
What would be the increase or (decrease, indicate “-“ sign) on net operating income if
the special order were accepted? 280000
Question 232 pts
Laurel Corporation has its own cafeteria with the following annual costs:
Food      P 100,000
Labor                   75,000
Overhead          110,000
Total                P 285,000
 
The overhead is 40% fixed. Of the fixed overhead, P25,000 is the salary of the cafeteria
supervisor. The remainder of the fix ed overhead is expected to be avoided when the
cafeteria is discontinued. Assuming the cafeteria supervisor will remain and Laurel will
continue to pay his/her salary, the maximum cost Laurel will be willing to pay an outside
firm to service the cafeteria is 260000