Gacad, Mallet S.

BSMA-3B

Problem 1 Bud Er
Revenue 84,000.00 40,000.00
Less: Variable Cost 38,400.00 16,000.00
Direct Fixed Costs 14,000.00 12,000.00
Allocated Fixed Cost 12,857.00 7,143.00
Net Income 18,743.00 4,857.00

Solution
Revenue (Bud) P70,000*120%= 84000
Allocation of total allocated fixed cost of P20,000 38400
To Bud: 3,600/5600*20,000= 12857.14 or 12857
To Er: 2,000/5,600*20,000= 7142.86 or 7143

2. Yes, Boozy should close the Wise Division because the profit increase by P2,600 (23600-21,000). The increase
in sales by 20% of the Bud Division is enough to offset the Wise Division.

Problem 2
R S T
Revenue after further processing 375,000 575,000 225,000
Less: Revenue at split-off 250,000 400,000 150,000
Incremental Revenue 125,000 175,000 75,000
Incremental Cost -150,000 -150,000 -100,000
Increase (Decrease) in profit -25,000 25,000 -25,000

Solution after processing

Product R (2,500*150)= 375,000 Product R and Product S should b
Product S (5,000*115)= 575,000
Products T ( 7,000*20)= 225,000

Revenue @ split-off
Product R (2,500*100)= 250,000
Product S (5,000*80)= 400,000
Product T (7,500*20)= 150,000

Problem 3 Standard
1 Selling price per unit 50.00
Less: Variable cost per unit 30.00
Contribution Margin 20.00
Machine hours 1.60
 Contribution margin per hour 12.50

2 market demand per unit 600.00 100.00

machine hours 960.00 375.00
additional machine hours available
Total

Total machine hours available 2,535.00

less: Standard (600 x 1.6) 960.00
balance 1,575.00
divided by machine hours needed for deluxe 3.75
No. of units for deluxe 420.00

Allocation units Contribution margin per unit

Standard 960 20
deluxe 420 45

Problem 4
1 The shut-down point in units is
Fixed costs under continued operations (for 2 months):
Factory Overhead (460,000*2 months)
Selling Costs (620,000 *2months)
Total
Less: Shutdown Costs
Factory Overhead (340,000 *2 months)
Selling Costs ((620,000-62,000) *2months)
Start-up costs
Difference
Divide by CM per unit (280-168)
Shutdown points in units
 Total
124,000.00
54,400.00
26,000.00
20,000.00
23,600.00

(23600-21,000). The increase

oduct R and Product S should be sold @ split-off. Product should be process futher.

Deluxe
75.00
30.00
45.00
3.75
 12.00

1,335.00
1,200.00
2,535.00

Total contribution margin

19200
18900

920,000
1,240,000
2,160,000

680,000
1,116,000
56000 1,852,000
308,000
112
2,750