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Problems Problem 1 (Accept or Reject an Order) As a result of an expansion program, Marianas, Inc., has excess capacity of 40,000 machine hours, which is expected to be absorbed by the domestic market in a few months. The company has received inquiries from two companies located in another country. One offers to buy 21,000 units of Product A at P1.20 per unit; the second offers to buy 30,000 units of Product B at P1.40 per unit. Marianas, Inc. can accept only one of these tv/o offers. The standard cost for these two products is as follows: PRODUCT A PO.50 PRODUCT B PO.70 Materials Labor 0.20 0.24 Factory overhead Total standard cost 0.40 P1.10 0.56 P1.50 Factory overhead is applied on a machine-hour basis at P11.20 per hour, 75% factory overhead is estimated to be fixed. No marketing and administrative expenses would be applicable to either order. Transportation charges are to be paid by the buyer. Required: Which order should be accepted?

Problems Problem 1 (Accept or Reject an Order) As a result of an expansion program, Marianas, Inc., has excess capacity of 40,000 machine hours, which is expected to be absorbed by the domestic market in a few months. The company has received inquiries from two companies located in another country. One offers to buy 21,000 units of Product A at P1.20 per unit; the second offers to buy 30,000 units of Product B at P1.40 per unit. Marianas, Inc. can accept only one of these tv/o offers. The standard cost for these two products is as follows: PRODUCT A PO.50 PRODUCT B PO.70 Materials Labor 0.20 0.24 Factory overhead Total standard cost 0.40 P1.10 0.56 P1.50 Factory overhead is applied on a machine-hour basis at P11.20 per hour, 75% factory overhead is estimated to be fixed. No marketing and administrative expenses would be applicable to either order. Transportation charges are to be paid by the buyer. Required: Which order should be accepted?

FINANCIAL ACCOUNTING
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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Problems Problem 1 (Accept or Reject an Order) As a result of an expansion program, Marianas, Inc., has excess capacity of 40,000 machine hours, which is expected to be absorbed by the domestic market in a few months. The company has received inquiries from two companies located in another country. One offers to buy 21,000 units of Product A at P1.20 per unit; the second offers to buy 30,000 units of Product B at P1.40 per unit. Marianas, Inc. can accept only one of these tv/o offers. The standard cost for these two products is as follows: PRODUCT B PRODUCT A P0.50 Materials PO.70 Labor 0.20 0.24 Factory overhead Total standard cost 0.40 P1.10 0.56 P1.50 Factory overhead is applied on a machine-hour basis at P11.20 per hour, 75% factory overhead is estimated to be fixed. No marketing and administrative expenses would be applicable to either order. Transportation charges are to be paid by the buyer. Required: Which order should be accepted?
Transcribed Image Text:Problems Problem 1 (Accept or Reject an Order) As a result of an expansion program, Marianas, Inc., has excess capacity of 40,000 machine hours, which is expected to be absorbed by the domestic market in a few months. The company has received inquiries from two companies located in another country. One offers to buy 21,000 units of Product A at P1.20 per unit; the second offers to buy 30,000 units of Product B at P1.40 per unit. Marianas, Inc. can accept only one of these tv/o offers. The standard cost for these two products is as follows: PRODUCT B PRODUCT A P0.50 Materials PO.70 Labor 0.20 0.24 Factory overhead Total standard cost 0.40 P1.10 0.56 P1.50 Factory overhead is applied on a machine-hour basis at P11.20 per hour, 75% factory overhead is estimated to be fixed. No marketing and administrative expenses would be applicable to either order. Transportation charges are to be paid by the buyer. Required: Which order should be accepted?
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