Fixed The company has 1,000 units left over from last year's production which have small defects and which will have to be sold at a reduced price as part of a clearance sale provided that it will be refurbished at a cost of P1.50 per unit and there will be a need to purchase a special tool costing P 2,000 which will have no other use other than the refurbishing. Also, 50% of variable selling and administrative costs would have to be incurred to sell the defective units. The sale of the left over might affect the company's regular sale which may decrease by 500 units. Another option that Bacolod has is to simply sell the 1,000 units at its scrap value of P3.00 per unit. Required: 1. How much should be the minimum price per unit of the refurbished units? 2. If the refurbished units can be sold for P10 each, which will be more advantageous for Bacolod, to refurbished or to sell the units at its scrap, and how much is the total advantage? 3. In relation to the previous item, assuming that refurbished units can be sold for P10 each, how much should be the scrap value of the old units for Bacolod to be indifferent?

Fixed The company has 1,000 units left over from last year's production which have small defects and which will have to be sold at a reduced price as part of a clearance sale provided that it will be refurbished at a cost of P1.50 per unit and there will be a need to purchase a special tool costing P 2,000 which will have no other use other than the refurbishing. Also, 50% of variable selling and administrative costs would have to be incurred to sell the defective units. The sale of the left over might affect the company's regular sale which may decrease by 500 units. Another option that Bacolod has is to simply sell the 1,000 units at its scrap value of P3.00 per unit. Required: 1. How much should be the minimum price per unit of the refurbished units? 2. If the refurbished units can be sold for P10 each, which will be more advantageous for Bacolod, to refurbished or to sell the units at its scrap, and how much is the total advantage? 3. In relation to the previous item, assuming that refurbished units can be sold for P10 each, how much should be the scrap value of the old units for Bacolod to be indifferent?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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