200 400 700 Contribution Margin P200 P300 P40
Grease Company makes three products. Following are the revenue and cost data for a typical month.
|
|
PRODUCTS |
|
||
|
|
X |
Y |
Z |
TOTAL |
|
Sales |
P300 |
P500 |
P800 |
P1,600 |
|
Variable Costs |
100 |
200 |
400 |
700 |
|
Contribution Margin |
P200 |
P300 |
P400 |
P900 |
|
Fixed Costs: |
|
|
|
|
|
Avoidable |
P80 |
P100 |
P120 |
P300 |
|
Common, allocated on the basis of peso sales |
60 |
100 |
160 |
320 |
|
Total Fixed Costs |
P140 |
P200 |
P280 |
P620 |
|
PROFIT |
P60 |
P100 |
P120 |
P280 |
REQUIRED: Answer each of the following questions independently.
- Closer analysis reveals that X, Y, and Z are joint products of a joint process and all are now being processed beyond the split-off point. The cost of the joint process including raw material, is the P320 joint allocated fixed cost. All of the split-off point. If the sales values of X, Y, and Z at split-off are P110, P220, and P230, respectively, could be the company increase its profits by selling one or more products at split-off? If so, which product(s) should be sold at split-off and what will be the increase in total profit be?
- Assume that the company has the option to sell all as is or to process all, which option would be beneficial to the company?
- Unit sales of X and Z are 100 and 200, respectively. Both products are made on a single machine that has a limited capacity. The machine can make five units of X per hour, or eight units of Z.
(a) If the company can sell all that it can make of either product, should it continue to make both products? If not, which product should the company make?
(b)Assume the machine is being operated at its capacity of 45 hours per month. What will happen to monthly profits if the company makes only the more profitable product as determined in part (a)? Give the peso increase in profits/
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