WalangLabel Company is a liquor company, the business has not been performing well this last few months due to the liquor ban imposed by the government. Thecompany is considering whether it should shutdown temporarily for three months. The selling price and other costs of operating are presented below:Selling priceP500Variable manufacturing costsP280 per unitVariable selling costsP60 per unitMonthly Fixed costs:Manufacturing costsP250,000Selling costsP120,000Administrative costsP125,000If the company will temporarily close it would incur P150,000 in retrenchment costs and P80,000 in reopening costs. Manufacturing costs and selling cost would notbe incurred and administrative costs of P50,000 would be avoided per month if they decide to shut down. The company expects to sell 100 units per month if itwould continue to operate.What is the shutdown point in sales?

The manufacturing cost is the total cost of all resources used in the manufacture of a product. The…

wn temporarily for three months. The selling price and other c 00 -280 per unit -60 per unit 50,000 20,000 25,000 ur P150,000 in retrenchment costs and P80,000 in reopening would be avoided per month if they decide to shut down. The

wn temporarily for three months. The selling price and other c 00 -280 per unit -60 per unit 50,000 20,000 25,000 ur P150,000 in retrenchment costs and P80,000 in reopening would be avoided per month if they decide to shut down. The

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 54P

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Frazer Corp sells several products. Information of average revenue and costs is as follows: Selling price per unit $28.50 Variable costs per unit: Direct material $6.00 Direct manufacturing labor $1.25 Manufacturing overhead $0.85 Selling costs $2.50 Annual fixed costs $125,000 If the company decides to lower its selling price by 15%, but continues to sell 18,000 units, the operating income is reduced by OA. $125,000 B. $72,200 C. $77,040 D. $18,000
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