ANSWER THIS FOLLOWING: 3. Calculate the operating income of Metro Corporation in 20X2 and 20X3. 4. Compute for the revenue effect and cost effects of the growth component. Assuming that the direct materials costs that would be required in 20X3 to produce 210 units instead of the 200 units in 20X2, assuming the 20X2 input-output relationship continued into 20X3, equal 315,000 kilograms. Manufacturing, conversion, design, selling, and customer-service costs remain the same. 5. Solve the revenue effect and cost effects of the price-recovery component.
ANSWER THIS FOLLOWING: 3. Calculate the operating income of Metro Corporation in 20X2 and 20X3. 4. Compute for the revenue effect and cost effects of the growth component. Assuming that the direct materials costs that would be required in 20X3 to produce 210 units instead of the 200 units in 20X2, assuming the 20X2 input-output relationship continued into 20X3, equal 315,000 kilograms. Manufacturing, conversion, design, selling, and customer-service costs remain the same. 5. Solve the revenue effect and cost effects of the price-recovery component.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ANSWER THIS FOLLOWING:
3. Calculate the operating income of Metro Corporation in 20X2 and 20X3.
4. Compute for the revenue effect and cost effects of the growth component. Assuming that the direct
materials costs that would be required in 20X3 to produce 210 units instead of the 200 units in 20X2,
assuming the 20X2 input-output relationship continued into 20X3, equal 315,000 kilograms.
Manufacturing, conversion, design, selling, and customer-service costs remain the same.
5. Solve the revenue effect and cost effects of the price-recovery component.
Transcribed Image Text:Metro Corporation makes a special-purpose machine called "OM" used in the textile industry. Metro has
designed the OM machine for 20X3 to be distinct from its competitors with a premium price. It has been
regarded as a superior machine. The company presents the following data for the years 20X2 and 20X3.
20X2
20х3
1. Units of OM produced and sold
2. Selling price
3. Direct materials (kilograms)
4. Direct materials cost per kilogram
5. Manufacturing capacity in units of an OM
200
210
P40,000
300,000
P42,000
310,000
P8.50
P8
250
250
6. Total conversion costs
P2,000,000
P8,000
P2,025,000
P8,100
7. Conversion costs per unit of capacity
8. Selling and customer-service capacity
9. Total selling and customer-service costs
10. Selling and customer-service capacity cost per customer
11. Design staff
12. Total design costs
13. Design costs per employee
100 customers
95 customers
P1,000,000
P10,000
P940,500
P9,900
12
12
P1,200,000
P1,212,000
P100,000
P101,000
Metro produces no defective machines, but it desires to reduce direct materials usage per OM machine in
20X2. Conversion costs in each year depending on production capacity defined in terms of OM units that can
be produced, not the actual units of OM produced. Selling and customer-service costs depend on the number
of customers that Metro can support, not the actual number of customers the company serves. Metro has 75
customers in 20X2 and 80 customers in 20X3. At the start of each year, management uses its discretion to
determine the number of design staff for the year. The design staff and costs have no direct relationship with
the quantity of OM produced or the number of customers to whom OM is sold.
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