C Manufacturing, which uses the high-low method, makes a product See.
The company incurs three different cost
types (A, B, and C) and has a relevant range of operation between 2,500 units and 10,000 units per month. Per-unit
costs at two different activity levels for each cost type are presented below.
Type A Type B Type C Total
5,000 units P4 P9 P4 P17
7,500 units P4 P6 P3 P13
The cost types shown above are identified by behavior as:
Type A Type B Type C
Variable; Fixed; Semi variable
If the Company produces 8,000 units, the total cost would be:
100,000
C Company manufactures and sells product See. C developed its business plan based on the assumption that the
product would sell at a price of P400 each. The variable costs for each unit were projected at P200, and the annual
fixed costs were budgeted at P100, 000. C's after-tax profit objective was P240, 000; the company's effective tax rate
is 40%.
While C's sales usually rise during the second quarter, the May financial statements reported that sales were not
meeting expectations. For the first 5 months of the year, only 350 units had been sold at the established price, with
variable costs as planned, and it was clear that the after-tax profit projection would not be reached unless some
actions were taken. C's president assigned a management committee to analyze the situation and develop an
alternative course of action.
The following was presented to the president. Reduce the sales price by P40. The company estimates that with the
significantly reduced sales price, 2,700 units can be sold during the remainder of the year. Total fixed and variable
unit costs will stay as budgeted.
Assuming no changes were made to the selling price or cost structure, how many units must C sell to achieve its
after-tax profit objective? 2500
If management decides to reduce the selling price by P40,
What will after-tax profit be? 241,200
C manufacturing company that produces a single product has provided the following data concerning its most recent
month of operations:
Units in beginning inventory...................... 0
Units produced.......................................... 1,900
Units sold................................................... 1,700
Units in ending inventory........................... 200
Variable costs per unit:
Direct materials...................................... P33
Direct labor............................................. P32
Variable manufacturing overhead.......... P2
Variable selling and administrative........ P6
Fixed costs:
Fixed manufacturing overhead.............. P72,200
Fixed selling and administrative............. P6,800
The company uses 2,000 units denominator activity on fixed overhead.
How much is unit cost of ending inventory under standard absorption costing?
103.10
How much is the actual Cost of Sales that would appear in the income statement? 178,880
The sales and cost data for C Company’s new product are as follows:
Sales (P50 per unit): P1, 175,000
Variable Manufacturing cost per unit: P 12.00
Variable Marketing cost per unit: P 4.50
Total annual Fixed Costs:
Manufacturing: P200, 000
Marketing and Administrative: P 45,500
There was no inventory at the beginning of the year. Normal capacity of the plant is 25,000 units. There were 1,000
units on hand at the end of the year.
What amount of fixed costs were charged to operations under variable costing and absorption costing?
245,000 and 237,500
The C Company’s year-end income statement is as follows:
Sales (20,000 units): P360, 000
Variable costs: 220,000
Contribution margin: P140, 000
Fixed costs: 105,000
Net income: P 35,000
C’s management is unhappy with the results and plans to make some changes for next year. If management
implements a new marketing program, fixed costs are expected to increase by P19, 200 and variable costs to
increase by P1 per unit. Unit sales are expected to increase by 15 percent.
What is the effect on income if the foregoing changes are implemented?
Decrease 21,200
C Company is selling three products, Product S, Product I, and Product M. The Company sells three units of S for
every unit of M, and two units of me for every unit of S. Fixed costs are P700, 000. Contribution margins are:
P2.00 per unit of S; P 4.00 per unit of me and P 5.00 per unit of M.
How many units of Product I would the Company sell at breakeven point? 120,000
Given the following information for C Co:
Direct Labor hours 12,000
Direct Labor cost P 2.70/hr.
Direct Material cost P 75/unit
Total Manufacturing cost P 132,600
Fixed overhead cost P 36,000
Variable overhead cost 50% of total labor cost
How many units were produced using absorption costing? 640
C Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two
levels of monthly sales volume. The company sells the product for P88.70 per unit.
Sales volume (units)............................ 4,000 5,000
Cost of sales........................................ P273,600 P342,000
Selling and administrative costs.......... P56,800 P68,000
The Company uses the high and low point method in analyzing costs. The company’s total fixed costs were
12,000
C Company has provided the following data for the first five months of the year:
Machine Hours Lubrication Cost
January.................. 120 P750
February................ 160 P800
March..................... 200 P870
April....................... 150 P790
May........................ 170 P840
Using the least-squares regression method of analysis, the estimated variable lubrication cost per machine hour is
closest to: 1.56
The following data apply to C Corporation for a given period:
Total variable cost per unit: P3.50
Contribution margin ÷ sales: 30%
Breakeven sales (present volume): P1, 000,000
C Co wants to sell an additional 50,000 units at the same selling price and contribution margin. By how much can
fixed costs increase to generate profit equal to 10% of the sales value of the additional 50,000 units to be sold?
50,000
The sales and cost data for C Company’s new product are as follows:
Sales (P50 per unit): P1, 175,000
Variable Manufacturing cost per unit: P 12.00
Variable Marketing cost per unit: P 4.50
Total annual Fixed Costs:
Manufacturing: P200, 000
Marketing and Administrative: P 45,500
There was no inventory at the beginning of the year. Normal capacity of the plant is 25,000 units. There were 1,000
units on hand at the end of the year.
What is the net income under absorption costing? 549,750
C Company produces a single product. The following volume and average cost data for two accounting periods have
been provided by management:
Number of units............................. 500 800
Direct materials............................. P2.00 P2.00
Direct labor.................................... P1.50 P1.50
Manufacturing overhead (mixed)... P2.50 P1.75
Other overhead (mixed)................. P1.00 P0.625
The total estimated cost of producing and selling 5,000 units of product is: 21,500
The following data was provided by C Co Corporation:
Product A Product B Product C
Sales in pesos.............................. P80,000 P120,000 P100,000
Contribution margin ratio.............. 30% 45% 27%
If the total fixed costs and expenses are P 84,000, how much would be variable costs of Product C at breakeven
point? 58,400
The C Company manufactures and sells a single product. Budgeted data follow:
Forecasted annual sales volume................ 120,000 units
Selling price per unit................................. P25.00
Variable expenses per unit:
Raw materials......................................... P11.00
Direct labor............................................ 5.00
Manufacturing overhead........................ 2.50
Selling expenses..................................... 1.30
Total variable expenses per unit................ P19.80
Annual fixed expenses:
Manufacturing overhead........................ P192,000
Selling and administrative...................... 276,000
Total fixed expenses.................................. P468,000
If C Company's direct labor costs increase 8 percent, what selling price per unit of product must it charge to
maintain the same contribution margin ratio? 25.51
C Corporation, began operations at the start of the current year. Planned and actual production equaled 20,000 units,
and sales totaled 17,500 units at P95 per unit.
Cost data for the year were as follows:
Direct materials (per unit) P 18
Conversion cost:
Direct labor 160,000
Variable manufacturing overhead 280,000
Fixed manufacturing overhead 340,000
Selling and administrative costs (total) 430,000
How much of this cost would be held in year-end inventory under absorption costing and variable costing? 142,500
and 100,000
A new product will be marketed by C Co during the next year. Although the marketing department estimated
35,000 units can be sold for P 72 per unit, management allocated only enough manufacturing capacity for
25,000 units maximum of the new product annually. The fixed costs associated with the new product are
budgeted at P 900,000 for the year, including P 120,000 for depreciation on the new machine.
Each unit of product cost is given below. The company is subject to 40% income tax rate.
Variable cost
Direct materials P 14.00
Direct Labor 7.00
Manufacturing overhead 8.00
Total variable manufacturing cost 29.00
Selling expense 3.00
Total 32.00
The management has ruled that it will not allow commercial manufacturing of this product after the next fiscal
year, unless the after tax profit is at least P 150,000 during the first year. The unit selling price to
achieve this requirement must be: 78
C Company developed the following information for the year ended Dec 31, 20-7:
Product A Product B Total
Units Sold 4,000 6,000 10,000
Sales P12,000 P27,000 P39,000
Variable costs 6,000 15,000 21,000
Contribution margin P 6,000 P12,000 18,000
Fixed costs 12,600
Net income P 5,400
If the sales mix changes to 5,000 units of Product A and 5,000 units of Product B, the effect on the company’s
break-even point would be
To increase it by 200 units.
