PROBLEM 5

Product A sells for P12 per unit and its variable cost per unit is P10. Product B sells for P15 per unit and
its variable cost per unit is P12. The plant capacity is 350,000 machine hours and Product A requires 48
minutes to complete while Product B requires 75 minutes.
(1) Which of the following will provide the best sales mix of Product A and Product B assuming the
market limitation of Product A is 200,000 units and the market limitation of Product B is 250,000
units?

PROBLEM 6
The Disk Division of Systems of Tech Company produces a high quality computer disks. Unit production
costs (based on capacity production of 100,000 units per year) follow:
Direct materials P50
Direct labor 20
Overhead (20% variable) 10
Other information:
Sales price 100
SG & A costs (40% variable) 15
(2) The Disk Division is operating at a level of 70,000 chips per year. What is the minimum price
that the division would consider on a “special order” of 1000 disks to be distributed through
normal channels?
(3) Assuming that the Disk Division is producing and selling at capacity. What is the minimum sellin
price that the division would consider on a “special order” of 1,000 chips on which no variable
period costs would be incurred?

PROBLEM 7
Klare Inc. produces soya beans extract that is used by the food processors. During the month, Klare
produced 20,000 kilograms of the extract at a total cost of P100,000. The extract is sold at P8 per kilo.
A customer, Elijah Corporation, approached Klare and said that it would buy all the extracts produced if
the same would be processed further per its (Elijah’s) specifications.
(4) Klare estimates tha further processing costs would be P30,000. Which of the following
alternatives is the most advantages for Klare?

PROBLEM 8
Mercadejas Company operates two stores in Luzon---one in Manila and another in Quezon City. The
operating results for October 2020, which are representatives of all months, are condensed as follows:
 Manila Store QC Store Total
P
Sales P 400000 P 600000 1000000
Variable costs 160000 420000 580000
Contribution margin 240000 180000 420000
Direct fixed costs 100000 200000 300000
Store margin 140000 -20000 120000
Indirect fixed cost, peso
sales 20000 30000 50000
Operating income 120000 -50000 70000

Additional information:
1. Thirty percent (30%) of each store’s direct fixed cost cannot be eliminated even if either store is
closed.
2. If the Quezon City store is closed, the Manila Store’s sales would decrease by 20%. However,
closing the Manila Store would not affect the Quezon City Store’s sales.
(5) If the objective is to maximize total company profit, which store should be closed?
a. Manila Store
b. Quezon City Store
c. Both stores should be closed
d. Neither of the two should be closed

(6) If the Quezon City Store is closed, the company’s total income would increase (decrease) by
__________.

(7) In order to improve the profitability of the Quezon City Store, Mercadejas Company is
considering a promotional campaign that would not affect the Manila Store. The campaign would
cost P300,000 annually, and it is expected to increase the Quezon City Store’s sales by 20%.

The promotional campaign would result in a monthly increase (decrease) in Mercadejas

Company’s operating income of ___________.