Management

Answers:

SOLUTIONS FOR SET A:

.1. COST OF DIR. MAT. USED IS 85,000

DIR. MAT. PURCHASES ………. 110,000

LESS: INCREASE IN RM INVTY (25,000)

COST OF DM USED… 85,000

.2. APPLIED F.O. COST IS 342,000

DIR. LABOR = 256,000 PRIME COSTS - 85,000 DM USED

DIR. LABOR = 171,000

THUS, F.O. IS 200% x 171,000 = 342,000

.3. CGM IS 614,500

DM USED … 85,000

DL… 171,000

F.O. … 342,000

TOTAL … 598,000

Add: Decrease in WIP invty… 16,500

CGM ………………….. 614,500

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.4 answer is P34

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.5 answer is P135,000

Unit fixed manufacturing overhead = P210,000 ÷ 15,000 = P14

Unit product cost = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead

= P10 + P12 + P9+ P14 = P45

Carrying value = Unit product cost × Ending inventory in units

= P45 × (15,000 − 12,000) = P45 × 3,000 = P135,000

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.6 answer is 1.6

Total cont. margin (800,000 – 288,000)………….. 512,000

Divided by: Oper. Income (800K – 288K – 192K)……… 320,000

DOL………………. 1.6

.7 answer is P75,000

Solution:

| | Current | Proposed | |

| Sales | P800,000 | | |

| Variable expenses |  288,000 | | |

| Contribution margin | 512,000 | P560,000 | * |

| Fixed expenses |  192,000 | 240,000 | |

| Net operating income | P320,000 | P320,000 | |

Cont. margin ratio = 512,000 / 800,000 = 64%

New fixed costs = 192,000 + 64,000 advertising = 240,000

560,000 above is 64% of new sales

Thus, new sales should be 560,000 / 64% =875,000

Increase in sales is 875,000 new sales – 800,000 current sales = 75,000

Or simply:

BE sales after adding advertising ………. 875,000

Less: current level of sales ……………… (800,000)

Increase in sales ……………………………..75,000

.8 answer is P900,000...