Party Co. produces 1,000 parts per year, which are used in the assembly of one of its products. The unit product cost of these parts are: Variable manufacturing cost, P12.00; fixed manufacturing cost, P9.00. The part can be purchased from an outside supplier at P20.00. If the part is purchased from the outside supplier, two thirds of the fixed manufacturing costs can be eliminated. What would be the annual impact on the company’s net operating income as a result of buying the part from the outside supplier?
1. Party Co. produces 1,000 parts per year, which are used in the assembly of one of its products. The unit product cost of these parts are: Variable manufacturing cost, P12.00; fixed manufacturing cost, P9.00. The part can be purchased from an outside supplier at P20.00. If the part is purchased from the outside supplier, two thirds of the fixed
2.Division A produces a part that it sells to outside customers. Data concerning this part follows: Selling price to outside customers, P60; Variable cost per unit, P40; Total fixed costs, P100,000; Capacity in units, 20,000 units. Division B of the same company purchases 5,000 units of similar part from an outside supplier at a price of P58 per unit. If Division B wants to purchase 5,000 units from Division A instead, and Division A has no idle capacity, what should be the minimum transfer price?
3. Two products, TB and ID, emerge from a joint process. Product TB has been allocated P31,200 of the total joint costs of P48,000. A total of 5,000 units of product TB are produced from the joint process. Product TB can be sold at the split-off point for P24 per unit, or it can be processed further for an additional total cost of P15,000 and then sold for P26 per unit. If product TB is processed and sold, what would be the effect on the overall profit of the company compared with sale in its unprocessed form directly after the split- off point?
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