The costs of operating a joint process can be fixed or variable.

True
The right decision is to continue or retain a segment if
a) The segment is at a profit.
b) The segment is at a loss.
"c) The segment is at a loss but its revenue is greater than the sum of
its variable costs, avoidable costs, and opportunity costs. "
"d) The segment is at a loss but its revenue is lesser than the sum of its
variable costs, avoidable costs, and opportunity costs."
The following are examples of alternative choice problems EXCEPT:
a)Manufacture or purchase
b) Sold as is or remachine
c)Accept or reject a special order
d) Build or construct a building

The only revenues or costs that are relevant in decision making are the
incremental revenues or costs.
True

False
Which of the following statements is most correct?
a)Internal constraints are physical while external constraints are
imaginary.
b) Theory of Constraints is useful in analyzing internal and external
constraints.
c) Theory of Constraints is useful for identifying non-physical constraints
but cannot incorporate physical constraints.between the data and the
regression line.
"d) If there are constraints, all of the products can be manufactured
based on the demand for the product or full capacity of the machines
used to make the product."
"In considering a special order that will enable a company to make use of
presently idle capacity, depreciation costs would be irrelevant. "
True

False
A key factor in assessing a special order is
a) Availability of capacity to produce the additional units.
b) Shut down costs
c) Demand
 d) none of the above.
"To maximize total contribution margin, a firm faced with a production
constraint should promote those products having the highest contribution
margin per unit of constrained resource and having highest total contribution
margin."
True

False
"To maximize total contribution margin, a firm faced with a production
constraint should promote those products having the highest contribution
margin per unit of constrained resource and having highest total contribution
margin."
True

False
LVM Fabricators, Inc. estimates that 84,000 special components will be used in the manufacture of a
specialty steel window for the whole next year. Its supplier quoted a price of P55 per
component. LVM prefers to purchase 7,000 units per month, but its supplier could not guarantee
this delivery schedule. In order to ensure availability of these components, LVM is considering the
purchase of all the 84,000 units at the beginning of the year.
Assuming LVM can invest cash at 7%, the companys opportunity cost of
purchasing all the 84,000 units at the beginning of the year is: (Answer
in this format: e.g. P100,000, P225,500)

Rhea Company manufactures Product OP. Income statement last month is:
Sales (15,000) P300,000
VC 100,000
CM 200,000
FC 120,000
Profit P 80,000
Rhea plans to increase its current profit of P80,000. She plans a marketing strategy to increase profit
by additional advertising. The strategy will:
> Increase sales volume by 60%
> Increase FC by 20%
> P3.5 increase in variable cost per unit due to advertising
What will be the effect of the marketing strategy on the profit of Rhea? (Answer in this format: e.g.
Decrease-P20,000, Increase-P30,500.25)
Karen Department Store has five departments A, B, C, D, and E. Department Es future is being
evaluated
using the data below:
All Others DepartmentE Total
Sales P4,500,000 P 500,000 P5,000.000
Cost of sales (allvariable) 2,200,000 300,000 2,500,000
Grossmargin P2,300,000 P 200,000 P2,500,000
Rent andservices P 800,000 P 200,000 P1,000,000
Directsalaries 450,000 50,000 500,000
Advertisingexpenses 450,000 50,000 500,000
Totalexpenses P1,700,000 P 300,000 P2,000,000
Netprofit(loss) P 600,000 P (100,000) P 500,000
 Rent and services are corporate committed fixed expenses and are allocated evenly to the five
departments. Half of the advertising expenses varies with sales; the other half will not change
regardless of the decision and is allocated using sales amount.

How much is the company's total profit if Department E is dropped? (Answer

in this format: e.g. P200,000, P150,000)

How much is the variable contribution margin or contribution margin of Department E?

(Answer in this format: e.g. P200,000, P150,000)

Hector Company expects the following results, without considering any of the changes described
below.

Product C Product D Total

Sales P150 P380 P530

Variable costs 60 120 180

Contribution margin 90 260 350

Fixed costs - avoidable (40) (50) (90)

- unavoidable (80) (120) (200)

Profit (loss) P(30) P 90 P 60

The unavoidable costs are allocated based on unit sales of 2,000 C and 3,000 D.
Should Hector Drop Product C? Hom much is the advantage of the better alternative? (Answer in this
format: e.g Continue-P80, Drop-P80)
If product C is dropped and the unit sales of product D increased by 50%, what would the company's
income be? (Answer in this format: P100, P50)

Last week, Malou Enterprises purchased a new irrigation system called Spray costing P60,000. Its
annualcash operating costs are estimated to be P35,000. It has a four-year useful life and no residual
value. Today, a sales man has offered Malou a new system called Sprinkle that will cost P60,000 and
will also have a four-year useful life with no residual value. The Spray equipment can be used as a
trade-in for a P10,000 allowance. The annual cash operating costs of Sprinkle are estimated to be
P20,000. Sales of P400,000 and other operating expenses of P180,000 per year will be the same
under either alternative.
Ignoring the time value of money, should Malou purchase the Sprinkle System? How much is
the advantage or disadvantage? (Answer in this format: e.g. Yes-P20,000, No-P20,000)
 Carla Mae Companys normal capacity is 40,000 units. Since the past few months, it has
consistently utilized 80% of its capacity. For the last month, the result of operations is summarized
in the following statement:
Sales P1,440,000
Less: Variable costs 1,120,000
Contribution margin 320,000
Less: Fixed costs 100,000
Profit P 220,000
Of the variable and fixed costs shown on the statement, 3/5 are manufacturing costs and the
balance represents selling and admin expenses.
This month, Ryan Company submitted a proposal to buy 12,000 units of Carla Maes product at P33
per unit. The only variable selling cost to be incurred for this order is P7 per unit representing freight
charges that will be shouldered by Carla Mae. If the special order proves to be profitable, Carla Mae
is willing to sacrifice to reduce sales to regular customers so as not to exceed its normal capacity.
Should the order be accepted or rejected? How much is the advantage of the better alternative? (Answer
in this format: e.g. P10,000, P5,500.50)

Marvin Company needs 20,000 units of a certain part to be used in the production cycle. If Marvin
buys the part from Patrick Company instead of making it, Marvin could not use the realized facilities
in another manufacturing activity. 40% of the fixed overhead applied will continue regardless of
what decision is made.
The following information is available:
Cost to Marvin to make the part:
Direct Materials P 12
Direct Labor 30
Variable overhead 15
Fixed overhead applied 20
Total P 77
Cost to buy the part from Patrick 67
Which alternative is more desirable for Marvin and by what amount? (Answer in this format:
e.g. Buy-P100,000, Make-P100,000)

Carla Mae Companys normal capacity is 40,000 units. Since the past few months, it has
consistently utilized 80% of its capacity. For the last month, the result of operations is summarized
in the following statement:
Sales P1,440,000
Less: Variable costs 1,120,000
Contribution margin 320,000
Less: Fixed costs 100,000
Profit P 220,000
Of the variable and fixed costs shown on the statement, 3/5 are manufacturing costs and the
balance represents selling and admin expenses.
This month, Ryan Company submitted a proposal to buy 7,000 units of Carla Maes product at P33 per
unit. The only variable selling cost to be incurred for this order is P7 per unit representing freight
charges that will be shouldered by Carla Mae. If the special order proves to be profitable, Carla Mae
is willing to sacrifice to reduce sales to regular customers so as not to exceed its normal capacity.
Should the order be accepted or rejected? How much is the advantage of the better
alternative? (Answer in this format: e.g. Accept-P10,000, Reject-P10,000)
Arpee Company produces three products from a joint process costing P150,000. The following information
is
available:
Costs to Selling Price
Selling Price Process After Further
Units at Split-off Further Processing
AZ 15,000 P40 P105,000 P60
BY 30,000 P50 P180,000 P55
CX 40,000 P60 P120,000 P70
Which products should be processed further and how much is the advantage of further processing per unit?
(Answer in this format: e.g. A-P2,B-P5 OR C-P3 OR A-P2,B-P5,C-P3)

Cyril Company performs three different services: Able, Baker, and Charlie. Because of unusual demand,
all service requests cannot be filled. Fixed cost allocations are based on service hours. Cyril has 2,000
hours of available service time.
Able Baker Charlie
Sales price P50 P40 P30
Variable costs 30 25 20
Allocated fixed cost 10 10 10
Service time per request 0.8 hour 0.5 hour 0.2 hour
Assume that Cyril must meet at least 500 requests for each type of service for regular customers. What
quantities of each service should be performed to meet regular customer needs while maximizing
profits? (Answer in this format: e.g. Able-600,Baker-500,Charlie-500 OR Able-500,Baker-500,Charlie-1,000)

Marichu, Inc., produces three products: S, T, and C. A machine is used to produce the products. The
contribution margins, sales demands, and time on machine (in minutes) is as
follows:
Demand CM Time on machine
S 75 P18 10
T 60 24 15
C 70 40 20
There are 2,500 minutes available on the machine during the week.
How many units should be produced and sold to maximize the contribution? (Answer in this format: S-
P75,T-60,C-50 OR S-54.55,T-60,C-70)