Calea Corp. has received a request for a special order of 6,000 units of product Y69 for P13.70 each. Y69’s unit product cost is P11.50, determined as follows: Direct materials, P2.50; Direct labor, P1.90; Variable manufacturing overhead, P2.30; fixed manufacturing overhead, P4.80. Direct labor is a variable cost. The special order would have no effect on the company’s total fixed manufacturing costs. The customer would like modifications made to product Y69 that would increase variable cost by P8.10 per unit and that would require an investment of P20,000 in special molds that would have no salvage value. This special order would have no effect on the company’s other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, what would be the company’s increase or (decrease) in overall net operating income?
1. Calea Corp. has received a request for a special order of 6,000 units of product Y69 for P13.70 each. Y69’s unit product cost is P11.50, determined as follows: Direct materials, P2.50; Direct labor, P1.90; Variable manufacturing
2. Selected information from the accounting records of Vigor Co. is as follows: Net accounts receivable at Dec. 31, 2018, P900,000; Net accounts receivable at Dec. 31, 2019, P1,000,000; Inventories at Dec. 31, 2018, P1,100,000; Inventories at Dec. 31, 2019, P1,200,000; Accounts receivable turnover, 5 times; inventory turnover, 4 times. What is Vigor’s gross margin for 2019?
3. Permisya Co. produces 1,000 parts per year, which are used in the assembly of one of its products. The unit product cost of these parts are: Variable manufacturing cost, P12.00; fixed manufacturing cost, P9.00. The part can be purchased from an outside supplier at P20.00. If the part is purchased from the outside supplier, two thirds of the fixed manufacturing costs can be eliminated. What would be the annual impact on the company’s net operating income as a result of buying the part from the outside supplier?
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