NOTE: PAKICHECK PO MGA SOLUTION AT SAGOT HUHU

MGA DI SURE: 26,

1. The third unit of a job that has a 90 percent learning curve took 20 hours. The sixth unit
should take about how many hours?
Learning curve = 90%
3 = 20 hours
6 = 18 hours (20 hours x 90%)
FINAL ANSWER: 18 hours

Wait ganito amin dito

B = - 0.152003
3rd unit= 20 hours

Time for 1st unit

20 = a x 3^ -0.1520
20 = 0.84620
a= 20/ 0.84620
a=23.64 hours

6th unit= 23.64 x 6^-0.1520 = 18 hours

2. Consider the following information:

Transporting the product: 4.0 hours
Storing inventory: 3.5 hours
Inspecting the product: 0.5 hours
Manufacturing the product: 8.0 hours

Calculate (1) throughput time and (2) MCE for one unit.
Throughput time = P / (P + M + I + Q)
Manufacturing the product: 8.0 hours
Transporting the product: 4.0 hours
Inspecting the product: 0.5 hours
Throughput time = 12.5hours
FINAL ANSWER: 12.5 hours

MCE = value added / throughput time

8.0 / 12.5 = 64%
FINAL ANSWER: 64%

3. If the first unit took 75 hours to produce, and you have determined that an 80% learning curve
is appropriate, how long will it take to produce the fourth unit?
Learning curve = 80%
1 = 75 hours
2 = 60 hours (75 hours x 80%)
4 = 48 hours (68 hours x 80%)
FINAL ANSWER: 48 hours

4. Lake Corporation manufactures specialty components for the electronics industry in a highly
labor intensive environment. Arc Electronics has asked Lake to bid on a component that Lake
made for Arc last month. The previous order was for 80 units and required 120 hours of direct
labor to manufacture. Arc would now like 240 additional components. Lake experiences an 80%
learning curve on all of its jobs.
The number of direct labor hours needed for Lake to complete the 240 additional components is
Learning curve = 80%
80 units = 1.5 hours (120 hours / 80 units)
160 units = 1.2 hours (1.5 hours x 80%)
320 units = 0.96 hours (1.2 hours x 80%)

320 x 0.96 = 307.2 - 120 hours = 187.2 hours

FINAL ANSWER: 187.2 hours

5. At the beginning of 2021, Peterson Company installed a JIT purchasing and manufacturing
system. The following information has been gathered about one of the company's products;
Theoretical annual capacity: 2,200
Actual production: 2,000
Production hours available: 800
On-time deliveries: 900
Total deliveries: 950
Scrap (kg): 400
Materials used (kg): 12,800
Number of defective units: 30

Calculate the on-time delivery percentage, theoretical velocity, and actual velocity.
Theoretical velocity = Theoretical annual capacity / Production hours available
2200/800 = 2.75 units/hour

Actual velocity = Actual production / Production hours available

2000/800 = 2.5 units/hour

On- time delivery percentage= On-time deliveries/ total deliveries

900/950= 94.74% or 95%

6. If a learning situation has a learning curve of 80% and a time of 20 hours to build the initial
unit, the estimated time for the 4th unit in hours is
Learning curve = 80%
1 = 20 hours
2 = 16 hours (20 hours x 80%)
4 = 12.8 hours (16 hours x 80%)
FINAL ANSWER: 12.8 hours

7. A builder requires 4,000 hours to complete his first house. The experienced crew has a
learning rate of 80%. How much time (hours) would be required to complete the tenth house?
(Use at least three decimal places in the exponent if the logarithmic model is used.)
Learning curve = 80% (ln(80%)/In(2) = -0.322)
1 = 4000 hours
10 =1905.7239 (4000 hours x 10^(-0.322)
FINAL ANSWER: 1,905.7239 hours

8. Management of Mittel Rhein AG of Köln, Germany, would like to reduce the amount of time
between when a customer places an order and when the order is shipped. For the first quarter
of operations during the current year the following data were reported:

Inspection time: 0.3 days

Wait time (from order to start of production): 14.0 days
Process time: 2.7 days
Move time: 1.0 days
Queue time: 5.0 days

Compute the delivery cycle time and MCE for the quarter.
Throughput time = P / (P + M + I + Q)
Process time: 2.7 days
Move time: 1.0 days
Inspection time: 0.3 days
Queue time: 5.0 days
Throughput time = 9 days

MCE = value added / throughput time

2.7 / 9 = 30%
FINAL ANSWER: 30%

Delivery cycle time = wait time + throughput time

Wait time (from order to start of production): 14.0 days
Throughput time = 9 days
Delivery cycle time = 23 days
FINAL ANSWER: 23 days

9. The average labor cost per unit for the first batch produced by a new process is P120. The
cumulative average labor cost after the second batch is P72 per product. Using a batch size of
100 and assuming the learning curve continues, the total labor cost of four batches will be
100 = 120
200 = 72 (72/120 = 60% learning curve)
400 = 43.20 (72 x 60%)

Total labor cost = 400 x 43.20 = P17,280

FINAL ANSWER: P17,280

10. Ballard's Glass Company has a variable demand. Historically, its demand has ranged from
10 to 20 windows per day with an average of 15. John Ballard works eight hours a day, five days
a week. Each order is one window and each window takes 26 minutes.

Calculate the average waiting time and delivery cycle time, in minutes.

8 hours / 1 day x 60 minutes / 1 hour = 480 minutes/day

Average waiting time

15 x 26^(2) / 2 x (480 - (15 x 26 ))
10140 / 180
56.3333 minutes
FINAL ANSWER: 56.333 minutes

Cycle time = wait time + throughput time

Wait time = 56.3333 minutes
Throughput time = 26 minutes
Cycle time = 82.333 minutes
FINAL ANSWER: 82.333 minutes

11. A manager is trying to estimate the learning rate for a new job. The first unit required 16
hours and the fourth unit required just 14 hours The learning rate is
Formula: Y=aX^b
14 hrs = 16 hrs X^2
14 hrs/16 hrs = X^2
0.875 = X^2
(sqrt) 0.875 = 0.9354143467 or 93.54%
FINAL ANSWER: 93.54%

12. Rio Hondo Company is a manufacturer of electronic components. The following

manufacturing information is available for the month of May:
Good units manufactured: 40,000
Value added hours of manufacturing time: 20,000
Total units manufactured: 50,000
Total hours of manufacturing time: 30,000

Calculate the process productivity and process quality yield.

Process productivity = Total units manufactured / Value added hours of manufacturing
time
50,000 / 20,000 = 2.50 units
FINAL ANSWER: 2.50 units

Process quality yield = Good units manufactured / Total units manufactured

40,000 / 50,000 = 80%
FINAL ANSWER: 80%

13. A manager wants to estimate the learning percentage for a case where the time for the first
unit was 10 hours and the time for the fourth was 5 hours. The learning percentage should be
1 = 10 hours
4 = 5 hours
Formula: Y=aX^b
5 hrs = 10 hrs X^2
5 hrs/10 hrs = X^2
0.5 = X^2
(sqrt) 0.5 = 0.7071067812 or 70.71%
FINAL ANSWER: 70.71%

14. How long would a job with a 70% learning curve and a time of 20 hours for the first unit
require for the third unit?
Learning curve = 70%
ln(70%) / In(2) = -0.515
1 = 20 hours
2 = 14 hours (20 hours x 70%)
3 = 11.36 hours (20 hours x 3^(-0.515))
FINAL ANSWER: 11.36 hours

15. A product required 24 hours to complete the first unit. Managerial experience has estimated
the learning rate at 85%. How much time should be required to produce the 16th item? (Use at
least three decimal places in the exponent if the logarithmic model is used)
Learning curve = 85%
ln(85%) / In(2) = -0.234
1 = 24 hours
16 = 12.54 hours (24 hours x 16^(-0.234))
FINAL ANSWER: 12.54 hours

16. Given these unit completion times, what learning rate would be appropriate?
Unit Time

1 12.0

2 ?

3 8.1
 4 7.3

Formula: Y=aX^b
7.3 hrs = 12 hrs X^2
7.3 hrs/12 hrs = X^2
0.6083 = X^2
(sqrt) 0.608333333 = 0.7799572638 or 78%
FINAL ANSWER: 78%

17. Global Defense manufactures radar systems. It has just completed the manufacture of its
first newly designed system, RS-32 Manufacturing data for the RS-32 follow:
Direct material cost: P160,000 per unit of RS-32
Direct manufacturing labor time for first unit: 6,000 direct manufacturing labor-hours
Learning curve: 85%
Direct manufacturing labor cost: P30 per direct manufacturing labor hour
Variable manufacturing overhead cost: P20 per direct manufacturing labor hour.

Calculate the total variable costs of producing 3 and 8 units using individual unit-time learning
model.
ln(85%) / ln(2) = -0.234
Output Input Formula: Y = aX^b Total Time Unit Time

1 6,000 6000 6000

2 5100 (6000 hours x 85%) 11100 5100

3 4640 (6,000 hours x 15740 4640

3^(-0.234))

4 4335 (5100 hours x 85%) 20075 4335

5 4117 (6,000 hours x 24192 4117

5^(-0.234))

6 3945 (6,000 hours x 28137 3945

6^(-0.234))

7 3805 (6,000 hours x 31942 3805

7^(-0.234))

8 3685 (4335 hours x 85%) 35627 3685

3 units 8 units

Direct materials (160,000x 3) 480,000 (160,000 x 8) 1,280,000

 Direct manufacturing labor 472,200 1,068,810
(15,740 x 30) (35,627 x 30)

Variable manufacturing 314,800 712,540

(15,740 x 20) (35,627 x 20)

Total variable costs 1,267,000 3,061,350

FINAL ANSWER:
3 units = 1,267,000
8 units = 3,061,350

Calculate the total variable costs of producing 3 and 8 units using cumulative average-time
learning model
ln(85%) / ln(2) = -0.234
Output Input (round off Formula: Y = aX^b Total Time Unit Time
- whole
number)

1 6,000 6000 6000

2 5100 (6000 hours x 85%) 10200 4200

3 4640 (6,000 hours x 13920 3720

3^(-0.234))

4 4335 (5100 hours x 85%) 17340 3420

5 4117 (6,000 hours x 20585 3245

5^(-0.234))

6 3945 (6,000 hours x 23670 3085

6^(-0.234))

7 3805 (6,000 hours x 26635 2965

7^(-0.234))

8 3685 (4335 hours x 85%) 29480 2845

3 units 8 units

Direct materials 480,000 1,280,000

Direct manufacturing labor 417,600 884,400

(13,920 x 30) (29,480 x 30)

Variable manufacturing 278,400 589,600

 (13,920 x 20) (29,480 x 20)

Total variable costs 1,176,000 2,754,000

FINAL ANSWER:
3 units = 1,176,000
8 units = 2,754,000

18. A process with a learning curve of 90% produced the first item in 45 minutes. Approximately
how much time should be needed to produce the eighth item?
1st = 45 minutes
2 = 40.5 (45 minutes x 90%)
4 = 36.45 (40.5 minutes x 90%)
8 = 32.805 (36.45 minutes x 90%)
FINAL ANSWER: 32.805 minutes

19. If the third unit of a series of eight units took 13 hours to produce, how long will it take to
produce the fifth unit if an 85% learning curve is in effect?
Learning curve: 85%
ln(85%) / ln(2) = -0.234

3rd unit = 13 hours

13 = x*3^-0.234
13 = x* 0.7729
13/0.7729 = x
16.8194 = x

5th unit = 16.8194*5^-0.234

5th unit = 11.5325
FINAL ANSWER: 11.53 hours

20. Sanchez Custom Yachts, Inc. manufactures and sells luxury yachts. From the time an order
is placed till the time the yacht reaches the customer averages 200 days. These 200 days are
spent as follows:
Wait time: 50 days
Move time: 10 days
Process time: 90 days
Queue time: 30 days
Inspection time: 20 days

Calculate Sanchez's manufacturing cycle efficiency (MCE) for its yachts.

Process time: 90 days
Move time: 10 days
Inspection time: 20 days
 Queue time: 30 days
Throughput time: 150

MCE = process time/throughput time

= 90/150 = 0.6 or 60%
FINAL ANSWER: 60%

21. At the end of the 2020, Suave Corporation implemented a new labor process and
redesigned its product with the expectation that labor usage efficiency would increase. Now, at
the end of 2021, the president wants an assessment of the changes on the company's
productivity. The data needed for the assessment are as follows:

2020 2021

Output 30,000 38,000

Output prices P12 P12

Materials (lbs.) 10,000 10,400

Materials unit price P8 P7

Labor hours 14,000 15,000

Labor rate per hour P6 P7

Power (KwH) 12,000 13,000

Price per KwH P3 P4

Calculate the growth, price recovery, and productivity components that explain the change of
profits from 2020 to 2021.

2020 2021 Variance Growth PRC Productivity

Sales 360,000 456,000 96,000 96,000 0 0

Cost of inputs

Materials 80,000 72,800 7,200 -21,336 12,667 15,869

Labor 84,000 105,000 (21,000) -22,542 -17,757 19,299

Power 36,000 52,000 (16,000) -9600 -15200 8800

Profits 160,000 226,200 66,200 42,522 -20,290 43,968

Partial productivity ratio (2020) = 30,000 / 10,000 = 3
Materials 2020 PQ 2021
(38,000 / 3)

Input Quantity 10,000 12,667 10,400

Input price 8 8 7 7

Variance F/(U) -21,336 12,667 15,869

Partial productivity ratio (2020) = 30,000 / 14,000 = 2.14

Labor 2020 PQ 2021
(38,000 / 2.14)

Input Quantity 14,000 17,757 15,000

Input price 6 6 7 7

Variance F/(U) -22,542 -17,757 19,299

Partial productivity ratio (2020) = 30,000 / 12,000 = 2.5

Power 2020 PQ 2021
(38,000 / 2.5)

Input Quantity 12,000 15,200 13,000

Input price 3 3 4 4

Variance F/(U) -9600 -15200 8800

Sales 2020 PQ 2021

Output Quantity 30,000 38,000 38,000

Output price 12 12 12 12

Variance F/(U) 96,000 0 0

22. Soft Inc. has a target total labor cost of P3,600 for the first four batches of a product. Labor
is paid P10 an hour. If Soft expects an 80% learning curve, how many hours should the first
batch take?
Average hour after 4th batch = (3600 / 4 / 10) = 90
4th = 90 hours
2nd = 112.5 hours (90 hours / 80%)
1st = 140.625 (112.5 hours / 80%)
FINAL ANSWER: 140.625 hours

23. If work has a 70% learning curve, and the first unit took 10 hours, the third unit should take
about this many hours?
Formula: Y=aX^b
ln(70%) / ln(2) = -0.515
= 10 hrs x3^-0.515
FINAL ANSWER = 5.68 hrs

24. Havenot has estimated the first batch of product will take 40 hours to complete. A 90%
learning curve is expected If labor is paid P15 per hour, the target labor cost for four batches of
product is

Output Input Formula Total Time Unit Time

ln(90%) / ln(2) = -0.152

1 40 hours 40 40

2 36 hours (40 hours x 90%) 72 32

3 33.85 hours (40 hours x 3^(-0.152) 101.55 29.55

4 32.4 hours (36 hours x 90%) 129.6 28.05

Labor cost = P15 x 129.6 = 1944

FINAL ANSWER = 1,944

25. If a job has a 90 percent learning curve and the time for the second unit was 10 minutes, the
estimated time for the fourth unit would be _____ minutes.
Learning curve = 90%
2nd unit =10 mins * .90
4th unit = 9 mins
FINAL ANSWER = 9 minutes

26. Scottso Enterprises has a product that takes 2 hours of total machine time on 3 machines to
produce. On average, 17 units are produced in a week. Scottso runs 2 shifts, for a total of 80
hours per week.

Calculate the current cycle time and manufacturing cycle efficiency.

Current cycle time = time / units

= 80 hours / 17 units
= 4.71 hours ??? tama to

MCE
= (2 hours x 17 units)
= 34 hrs / 80 hrs = 42.5% ??? tama na

27. Murray Company manufactures fire hydrants in Gensan. The following information pertains
to operations during the month of May:

Processing hours (average per batch) : 8.0

Inspection hours (average per batch) : 1.5
Waiting hours (average per batch): 1.5
Move time (average per batch) 1.5
Units per batch: 20 units

Calculate the (1) throughput time and (2) MCE

Throughput Time
P/(P+M+I+Q)
Processing hours (average per batch) : 8.0
Inspection hours (average per batch) : 1.5
Waiting hours (average per batch): 1.5
Move time (average per batch) 1.5
FINAL ANSWER=12.5

MCE
Value added time/ throughput time
8.0 / 12.5 = 64%
FINAL ANSWER= 64%

28. Sulit Company plans to begin production of a new product on July 1. An 80% learning curve
is applicable to Sulit’s manufacturing operations. If it is expected to take 1,000 direct labor hours
to produce the first unit, how many direct labor hours should it take to produce the third and
fourth units?
Learning curve= 80%
Ln(80%)/(2)= -0.322
Output Input Formula Total Time Unit Time

1 1,000 hours 1000 1000

2 800 hours (1,000 hours x 80%) 1600 600

3 702 hours (1000 hours x 3^(-0.322)) 2106 506

4 640 hours (800 hours x 80%) 2560 454

3 = 506
4 = 454
960

FINAL ANSWER: 960 hours need ba ipag add???

29. Magdalo, Inc. manufactures a product that experiences the following activities.
Processing (three departments): 40 hours
Moving (four moves): 18 hours
Waiting time: 42 hours
Storage time (before delivery): 100 hours

The MCE for the product is:

Throughput
Processing= 40
Moving = 18
Wait = 42
Total = 100

MCE
Value added time/ throughput
40/100
FINAL ANSWER=40%

30. If the time to complete the fourth unit of a job was about half the time of the first unit, the
learning rate is ____ percent.

5 & 10 mema number lang

5 = 10 *x^2
5/10 = x^2
0.5 = x^2
sqrt(0.5)= x
0.707106 = x

Checking
6*.7071 *.7071 = 3

FINAL ANSWER= 70%

Alternative solution:
5/2.5= 2
2+5=7
7/10= 70%
31. One of the products manufactured by McAllen Company is a plastic disk. The information
below relates to the Disk Production Department.
Good units produced: 200,000
Units started in production: 250,000
Processing time (budgeted hours): 425
Processing time (total hours): 400
Value-added processing time: 300

Compute the (1) MCE, (2) process productivity, (3) process quality yield, and (4) hourly
throughput in the Disk Production Department?
Manufacturing Cycle Efficiency
= Value-added time/Throughput time
= 300/400
= 75%

Process productivity = total units manufactured / value added processing time

= 250,000 / 300
= 833.33 units

Process quality yield = good units produced / total units manufactured

= 200,000 / 250,000
= 80%

Hourly throughput = (value added processing time / processing time) × (good units
produced / total units manufactured) x (total units manufactured / value added
processing time)
= (300 / 400) x (200,000 / 250,000) x (250,000 / 300)
= 500 units/hour

FINAL ANSWER:
MCE = 75%
Process productivity = 833.33 units
Process quality yield = 80%
Hourly throughput = 500 units/hour

32. Titan company estimates that providing employees with a new health insurance package
with an additional cost of P34,900 will increase productivity by 6%. Current production is at
12,000 units where selling price is P190, total cost amounts to P150 which is inclusive of P120
in variable cost per unit

Determine the net increase in income if the 6% additional productivity is realized

Change in quantity = (12,000 x 6% x (P190-120)) - P34,900 = P15,500 net increase in income
41. Management of Mittel Rhein AG of Köln, Germany, would like to reduce the amount of time
between when a customer places an order and when the order is shipped. For the first quarter
of operations during the current year the following data were reported:

Inspection time: 0.3 days

Wait time (from order to start of production): 14.0 days
Process time: 2.7 days
Move time: 1.0 days
Queue time: 5.0 days

Compute the delivery cycle time and MCE for the quarter.
Solution:
Delivery cycle time = Wait time + Throughput time
Delivery cycle time = 14.0 days + 9.0 days
Delivery cycle time = 23 days

MCE = Value added / Throughput

MCE = Value added / (P + M + I + Q)
MCE = 2.7 days / (2.7 days + 1.0 days + 0.3 days + 5.0 days)
MCE = 2.7 days / 9.0 days
MCE = 30%

42. At the end of the 2020, Suave Corporation implemented a new labor process and
redesigned its product with the expectation that labor usage efficiency would increase. Now, at
the end of 2021, the president wants an assessment of the changes on the company's
productivity. The data needed for the assessment are as follows:
2020 2021

Output 30,000 38,000

Output prices P12 P12

Materials (lbs.) 10,000 10,400

Materials unit price P8 P7

Labor hours 14,000 15,000

Labor rate per hour P6 P7

Power (KwH) 12,000 13,000

Price per KwH P3 P4

Calculate the (1) growth, (2) price recovery, and (3) productivity components that explain the
change of profits from 2020 to 2021.
 2020 2021 Variance Growth PRC Productivity
(DI
BALANCE)

Sales 360,000 456,000 96,000 96,000 0 0

(30,000 x 12) (38,000 x 12)

Cost of
inputs

80,000 72,800 7200 -21,336 12,667 15,869

Materials (10,000 x 8) (10,400 x 7)

Labor 84,000 105,000 -21,000 -22,542 -17,757 19,299

(14,000 x 6) (15,000 x 7)

Power 36,000 52,000 -16,000 -9600 -15,200 8,800

(12,000 x 3) (13,000 x 4)

Profits 160,000 226,200 66,200 42,522 -20,290 43,968

PQ = Output-Current / Partial Productivity-Year1

PQ = 38,000 / (30,000/10,000)
PQ = 12,666.6667

Materials: 2020 PQ 2021

Input Quantity 10,000 12,667 10,400
Input Price 8 8 7 7
Variance F/(U) -21,336 -12,667 15,869
(10,000 - 12,667)x 8 (8 -7)x12,661 (12,667 - 10,400)x7

PQ = Output-Current / Partial Productivity-Year1

PQ = 38,000 / (30,000/14,000)
PQ = 38,000 / 2.14
PQ = 17,757

Labor: 2020 PQ 2021

Input Quantity 14,000 17,757 15,000
Input Price 6 6 7 7
Variance F/(U) -22,542 -17,757 19,299

PQ = Output-Current / Partial Productivity-Year1

PQ = 38,000 / (30,000/12,000)
PQ = 15,200

Power: 2020 PQ 2021

Input Quantity 12,000 15,200 13,000
Input Price 3 3 4 4
Variance F/(U) -9600 -15,200 8,800

PQ = Recent Quantity
Sales: 2020 PQ 2021
Output Quantity 30,000 38,000 38,000
Output Price 12 12 12 12
Variance F/(U) 96000 0 0
(38,000-30,000)x12 (12-12)x38,000 (38,000-38,000)x12

43. N & R Company transfers a product from division N to division R. Variable cost of this
product is anticipated to be P40 a unit and total fixed costs amount to P8,000. A total of 100
units are anticipated to be produced. Actual cost, however, amounts to P50 for variable costs.
Fixed costs were same as budget. However, actual output was twice as many.

The transfer price based on actual variable costs plus 130% markup amounts to: P115
Variable cost: P50
Markup: (P50 x 1.3) = 65
Transfer price = 50 + 65 = P115

The transfer price based on budgeted full cost plus 30% markup amounts to: P156
Variable cost: P40
Fixed cost: P8,000
Budgeted output: 100

Budgeted full cost: P40 + (P8,000 / 100) = P120

Markup: P120 x 30% = 36
Transfer price = 120 + 36 = 156

Actual cost per unit amounts to : P90

Variable cost: 50
Fixed cost: 8000
Actual output: 200
50 + (8000 / 200) = 90

44. If the investment turnover increased by 20% and ROS decreased by 30%, what's change in
the ROI?
decrease by 16%

45. The Cake Division of Bakery Corporation has the following segment information:

Sales: P1,000,000
Assets available for use: P1,800,000
Target rate of return: 10%
Residual income: P270,000

What were Cake Division's (1) return on investment, (2) margin and (3) turnover?

ROI = Income / Assets Invested

ROI = P450,000 / 1,800,000
ROI = 25%

Income = Residual Income + (Rate of Return x Asset)

Income = P270,000 + (10% x P1,800,000)
Income = P450,000

Minimum required rate of return: P180,000

Margin = NOI / Sales

Margin = P450,000 / P1,000,000
Margin = 45%

Turnover = Sales / AOA

Turnover = P1,000,000 / P1,800,000
Turnover = 0.5556

46. Bearing Division of Phantom Corp. sells 80,000 units of Part X to the outside market. Part X
sells for P10.00 and has a variable cost of P5.50 and a fixed cost per unit of P2.50. Bearing has
a capacity to produce 100,000 units per period. Motor Division currently purchases 10,000 units
of Part X from Bearing for P10.00. Motor has been approached by an outside supplier willing to
supply the parts for P9.00.
What is the effect on XYZ's overall profit if Bearing refuses the outside price and Motor decides
to buy outside?
P35,000 decrease in Phantom profit

What is the effect on XYZ's overall profit if Bearing refuses the outside price and Motor decides
to buy inside?
No change

47. Sun Division's tentative budget for next year is as follows:

Sales: P600,000
Variable expenses: P360,000
Fixed manufacturing expenses: P90,000
Fixed selling and administrative expenses: P110,000
Segment margin: P40 000
Mr. Johnston, the marketing manager, has proposed an aggressive advertising campaign
costing an additional P50,000 that he predicts will result in a 30% unit sales increase. Assuming
that Johnston's proposal is incorporated into the budget, what should be the increase in the
budgeted segment margin for next year?

Increase in contribution margin (600,000 - 360,000) x 30% 72,000

Advertising cost (50,000)

Increase in segment margin 22,000

48. Omid Publishing Company has three divisions: A, B, and C. The revenues of these divisions
are P29,000, P48,000, and P63,000 respectively. Variable costs of these divisions amount to
57%, 59%, and 64% of the given revenues. The divisions' short-term controllable fixed costs are
P4,200, P5,200, and P6,200 respectively. The divisions' long-term controllable fixed costs
amount to P3,800, P4,900, and P5,700 in the order given. The company's uncontrollable costs
amount to P7,150, and income tax is at 20% of operating income

Company's operating income amounts to:

Total A B C

Sales 140,000 29,000 48,000 63,000

Variable costs (85,170) (16,530) (28,320) (40,320)

29000 x 57% 48000 x 59% 63000 x 64%

Segment margin 54,830 12,470 19,680 22,680

Short term (15,600) (4,200) (5,200) (6,200)

controllable fixed
costs

Short term 39,230 8,270 14,480 16,480

controllable
margin

Long term (14,400) (3,800) (4,900) (5,700)

controllable fixed
costs

Long term 24,830 4,470 9,580 10,780

controllable
margin
 Uncontrollable (7,150)
costs

Operating 17,680
income

Tax rate 20%

Operating 14,144
income 17,680 x(1-20%)

49. A manual insertion process takes 30 minutes and eight pounds of material to produce a
product. Automating the insertion process requires 15 minutes of machine time and 7.5 pounds
of material. The cost per labor hour is P12, the cost per machine hour is P8, and the cost per
pound of materials is P10. How much is the non-value-added cost?
labor hour cost = 30/60 = 0.5 hours * 12 = P6
machine hour cost = 15/60 = 0.25 hours * 8 = P2
Materials cost = 8-7.5= .50 *10 = 5
non-value-added cost = 6 - 2 + 5 = 9

50. With its original design, a gear requires eight hours of setup time. By redesigning the gear
so that the number of different grooves needed is reduced by 50 percent, the setup time is
reduced by 75 percent. The cost per setup hour is P50. How much is the non-value-added cost?
Setup: P50
Setup time: 8 hours
Setup time reduction: 75%

Non-value-added cost = (8 x 75%) x P50 = P300 per setup

(NASA TAAS MGA SAGOT SA CASES)

Case C:
A product currently requires six moves. By redesigning the manufacturing layout, the number of
moves can be reduced from six to zero. The cost per move is $20.
Non-value-added cost = (6-0) x P20 = P120 per unit

Case D:
Inspection time for a plant is 16,000 hours per year. The cost of inspection consists of salaries
of eight inspectors, totaling $320,000. Inspection also uses supplies costing $5 per inspection
hour. The company eliminated most defective components by eliminating low-quality suppliers.
The number of production errors was reduced dramatically by installing a system of statistical
process control. Further quality improvements were realized by redesigning the products,
making them easier to manufacture. The net effect was to achieve a close to zero defect state
and eliminate the need for any inspection activity.

Case E:
Each unit of a product requires six components. The average number of components is 6.5 due
to component failure, requiring rework and extra components. By developing relations with the
right suppliers and increasing the quality of the purchased component, the average number of
components can be reduced to six components per unit. The cost per component is $500 .

Case F:
A plant produces 100 different electronic products. Each product requires an average of eight
components that are purchased externally. The components are different for each part. By
redesigning the products, it is possible to produce the 100 products so that they all have four
components in common. This will reduce the demand for purchasing, receiving, and paying bills.
Estimated savings from the reduced demand are $900,000 per year.

51. Company A manufactures wallets from fabric. In 2020, the company made 2,520,000
wallets using 2,000,000 yards of fabric at P3.85 per yard. It also incurred direct labor cost of
P9,922,500 for 661,500 hours. In 2021, the company makes 2,646,000 wallets, uses 1,764,000
yards of fabric at P3.70 per yard, and
reduces labor hours to 465,000 hours incurring a cost of P8,370,000.
For performance comparison, compute Company A's total factor productivity (TFP) for 2020 and
2021.

52. The Dean of Admissions at a university needs student help to process 6,400 application
forms. She has found that a new student helper can process 40
forms the first day. The helpers usually achieve an 85% learning rate. The Dean plans to hire 10
helpers, so each will process 640 forms. Assume that a batch
consists of 40 forms.
Determine how many days it will take 10 new helpers to process the 6,400 forms.

53.
54. Division 1 produces a plastic container that the Division 2 can use. Division 1 can produce
up to 100,000 of these containers per year. The variable costs of manufacturing the plastic
containers are P4.50. The Division 2 labels the plastic containers and uses them to store an
important industrial chemical, which is sold to outside customers for P50 per container. The
division's capacity is 20,000 units. The variable costs of processing the chemical (in addition to
the cost of the container itself) are P26.
Assume that Division 1 is operating at 75% of capacity. The Division 2 is currently buying 20,000
containers from an outside supplier for P9.50 each. Assume that any joint benefit will be split
evenly between the two divisions. What is the expected transfer price?

P5.75 (Variable = P4.00, SP = 7.50)

55. Company A produces goods in the United States, to be sold by a separate division located
in Italy. More specifically, the Italian division imports units of product X34 from the U.S. and sells
them for P950 each. The Italian division typically has a 25% markup on goods. The Italian
division is subject to a 40% tax rate whereas the U.S. tax rate is only 30%. The manufacturing
cost of product X34 in the United States is P600. These can be (and are) sold externally in the
United States for P800 each. Landing costs total P100 per unit, and an internal transfer avoids
P40 per unit of variable marketing costs. Furthermore, there is a 10% import duty, computed on
the transfer price, that will be paid by the Italian division and is deductible when computing
Italian income
Calculate the profitability of the (1) US. division, (2) Italian division, and (3) Company A as a
whole using the cost-plus method.