Homework Help is Here – Start Your Trial Now!
Business
Accounting
Fixed The company has 1,000 units left over from last year's production which have small defects and which will have to be sold at a reduced price as part of a clearance sale provided that it will be refurbished at a cost of P1.50 per unit and there will be a need to purchase a special tool costing P 2,000 which will have no other use other than the refurbishing. Also, 50% of variable selling and administrative costs would have to be incurred to sell the defective units. The sale of the left over might affect the company's regular sale which may decrease by 500 units. Another option that Bacolod has is to simply sell the 1,000 units at its scrap value of P3.00 per unit. Required: 1. How much should be the minimum price per unit of the refurbished units? 2. If the refurbished units can be sold for P10 each, which will be more advantageous for Bacolod, to refurbished or to sell the units at its scrap, and how much is the total advantage? 3. In relation to the previous item, assuming that refurbished units can be sold for P10 each, how much should be the scrap value of the old units for Bacolod to be indifferent?

Fixed The company has 1,000 units left over from last year's production which have small defects and which will have to be sold at a reduced price as part of a clearance sale provided that it will be refurbished at a cost of P1.50 per unit and there will be a need to purchase a special tool costing P 2,000 which will have no other use other than the refurbishing. Also, 50% of variable selling and administrative costs would have to be incurred to sell the defective units. The sale of the left over might affect the company's regular sale which may decrease by 500 units. Another option that Bacolod has is to simply sell the 1,000 units at its scrap value of P3.00 per unit. Required: 1. How much should be the minimum price per unit of the refurbished units? 2. If the refurbished units can be sold for P10 each, which will be more advantageous for Bacolod, to refurbished or to sell the units at its scrap, and how much is the total advantage? 3. In relation to the previous item, assuming that refurbished units can be sold for P10 each, how much should be the scrap value of the old units for Bacolod to be indifferent?

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter2: Basic Cost Management Concepts
Section: Chapter Questions
Problem 21E: Ellerson Company provided the following information for the last calendar year: During the year,...
See similar textbooks
icon
Related questions
Question
100%
Bacolod Company, which manufactures and sells a single product for P15.00, is operating at full capacity of 20,000 units per month. The following unit costs relate to the manufacture of this product: Manufacturing: Direct materials Direct labor Variable overhead Fixed overhead P 2.00 4.00 1.00 1.80 Selling and administrative: Variable Fixed 3.00 1.20 The company has 1,000 units left over from last year's production which have small defects and which will have to be sold at a reduced price as part of a clearance sale provided that it will be refurbished at a cost of P1.50 per unit and there will be a need to purchase a special tool costing P 2,000 which will have no other use other than the refurbishing. Also, 50% of variable selling and administrative costs would have to be incurred to sell the defective units. The sale of the left over might affect the company's regular sale which may decrease by 500 units. Another option that Bacolod has is to simply sell the 1,000 units at its scrap value of P3.00 per unit. Required: 1. How much should be the minimum price per unit of the refurbished units? 2. If the refurbished units can be sold for P10 each, which will be more advantageous for Bacolod, to refurbished or to sell the units at its scrap, and how much is the total advantage? 3. In relation to the previous item, assuming that refurbished units can be sold for P10 each, how much should be the scrap value of the old units for Bacolod to be indifferent?
Transcribed Image Text:Bacolod Company, which manufactures and sells a single product for P15.00, is operating at full capacity of 20,000 units per month. The following unit costs relate to the manufacture of this product: Manufacturing: Direct materials Direct labor Variable overhead Fixed overhead P 2.00 4.00 1.00 1.80 Selling and administrative: Variable Fixed 3.00 1.20 The company has 1,000 units left over from last year's production which have small defects and which will have to be sold at a reduced price as part of a clearance sale provided that it will be refurbished at a cost of P1.50 per unit and there will be a need to purchase a special tool costing P 2,000 which will have no other use other than the refurbishing. Also, 50% of variable selling and administrative costs would have to be incurred to sell the defective units. The sale of the left over might affect the company's regular sale which may decrease by 500 units. Another option that Bacolod has is to simply sell the 1,000 units at its scrap value of P3.00 per unit. Required: 1. How much should be the minimum price per unit of the refurbished units? 2. If the refurbished units can be sold for P10 each, which will be more advantageous for Bacolod, to refurbished or to sell the units at its scrap, and how much is the total advantage? 3. In relation to the previous item, assuming that refurbished units can be sold for P10 each, how much should be the scrap value of the old units for Bacolod to be indifferent?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Relevant cost analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Managerial Accounting: The Cornerstone of Busines…
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Principles of Cost Accounting
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Financial And Managerial Accounting
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
SEE MORE TEXTBOOKS