Problems Problem 1 (Accept or Reject an Order) As a result of an expansion program, Marianas, Inc., has excess capacity of 40,000 machine hours, which is expected to be absorbed by the domestic market in a few months. The company has received inquiries from two companies located in another country. One offers to buy 21,000 units of Product A at P1.20 per unit; the second offers to buy 30,000 units of Product B at P1.40 per unit. Marianas, Inc. can accept only one of these tv/o offers. The standard cost for these two products is as follows: PRODUCT A PO.50 PRODUCT B PO.70 Materials Labor 0.20 0.24 Factory overhead Total standard cost 0.40 P1.10 0.56 P1.50 Factory overhead is applied on a machine-hour basis at P11.20 per hour, 75% factory overhead is estimated to be fixed. No marketing and administrative expenses would be applicable to either order. Transportation charges are to be paid by the buyer. Required: Which order should be accepted?

Problems Problem 1 (Accept or Reject an Order) As a result of an expansion program, Marianas, Inc., has excess capacity of 40,000 machine hours, which is expected to be absorbed by the domestic market in a few months. The company has received inquiries from two companies located in another country. One offers to buy 21,000 units of Product A at P1.20 per unit; the second offers to buy 30,000 units of Product B at P1.40 per unit. Marianas, Inc. can accept only one of these tv/o offers. The standard cost for these two products is as follows: PRODUCT A PO.50 PRODUCT B PO.70 Materials Labor 0.20 0.24 Factory overhead Total standard cost 0.40 P1.10 0.56 P1.50 Factory overhead is applied on a machine-hour basis at P11.20 per hour, 75% factory overhead is estimated to be fixed. No marketing and administrative expenses would be applicable to either order. Transportation charges are to be paid by the buyer. Required: Which order should be accepted?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 41E

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