XYZ Company produces speakers for PA systems. The speakers are sold to retail music store for P 30. Manufacturing and other costs are follows: Direct materials P 9.00 Direct labor 4.50 Factory overhead 3.00 Distribution 1.50 Total P 18.00 Variable costs per unit: Factory overhead 120,000 Selling and admin 60,000 Total 180,000 Fixed costs per month: The variable distribution costs are for the transportation to the retail music stores. The current production and sales volume is 20,000 per year. Capacity is 25,000 units per year. A Calapan based manufacturing firm has offered a one-year contract to supply speaker parts at a cost of P 6.50 per unit. If XYZ accepts the offer, it will be able to reduce variable costs by 30 percent and rent the unused space to outside firm for P 18,000 per year. All other information remains the same as the original data. B. What is the effect on profit s if XYZ buys from the Calapan based firm?\
XYZ Company produces speakers for PA systems. The speakers are sold to retail music store for P 30. Manufacturing and other costs are follows:
|
Direct materials |
P 9.00 |
|
Direct labor |
4.50 |
|
Factory overhead |
3.00 |
|
Distribution |
1.50 |
|
Total |
P 18.00 |
Variable costs per unit:
|
Factory overhead |
120,000 |
|
Selling and admin |
60,000 |
|
Total |
180,000 |
Fixed costs per month:
The variable distribution costs are for the transportation to the retail music stores. The current production and sales volume is 20,000 per year. Capacity is 25,000 units per year.
A Calapan based manufacturing firm has offered a one-year contract to supply speaker parts at a cost of P 6.50 per unit. If XYZ accepts the offer, it will be able to reduce variable costs by 30 percent and rent the unused space to outside firm for P 18,000 per year. All other information remains the same as the original data.
B. What is the effect on profit s if XYZ buys from the Calapan based firm?\
C. Assuming that A Calapan based manufacturing firm has offered a one-year contract to supply speaker parts at a cost of P17.00 per unit. If XYZ accepts the offer, it will be able to rent the unused space to an outside firm for P 18,000 per unit per year. All other information remains the same as the original data. What is the maximum amount XYZ Company can pay the Calapan based firm?
D. The speakers are currently unpackaged. Packaging them individually would increase costs by P 1.60 per unit. However, the unit could be sold for P 33.00. All other information remains the same as the original data. What is the effect on profits if XYZ Company packages the speakers?
E. Assume there is additional capacity for 60 more unit and the firm has reduce regular customer sales by 40 units in order to contract the special order. There are selling expenses on only the sales to the regular customer. What is the minimum amount that is acceptable for the special order?
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