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The S Company provides you with the following information on its products: Unit selling price Unit variable costs and expenses P100 75 Fixed costs and expenses per year P600,000 It has been estimated that during a temporary shutdown o four months, fixed Is and expenses can be reduced by 20%, although additional costs of maintenance security of P18,000 has to be incurred. QUIRED:

The S Company provides you with the following information on its products: Unit selling price Unit variable costs and expenses P100 75 Fixed costs and expenses per year P600,000 It has been estimated that during a temporary shutdown o four months, fixed Is and expenses can be reduced by 20%, although additional costs of maintenance security of P18,000 has to be incurred. QUIRED:

Managerial Accounting: The Cornerstone of Business Decision-Making
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 11MCQ: Garrett Company provided the following information: Common fixed cost totaled 46,000. Garrett...
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The S Company provides you with the following information on its products: Unit selling price Unit variable costs and expenses P100 75 Fixed costs and expenses per year P600,000 It has been estimated that during a temporary shutdown o four months, fixed costs and expenses can be reduced by 20%, although additional costs of maintenance and security of P18,000 has to be incurred. REQUIRED: 1. At what point in units would loss from operations be equal to shutdown costs? Prove by preparing an income statement. 2. How many units must be sold to avoid a loss? Prove also the answer by preparing an income statement. 3. How much is the net advantage or disadvantage of shutting down during the 4- month period? 4. Assuming that the additional cost for security will not change at P18,000, compute again for shutdown point, if the shutdown would be: a. Three months b. Six months c. Five months d. One year
Transcribed Image Text:The S Company provides you with the following information on its products: Unit selling price Unit variable costs and expenses P100 75 Fixed costs and expenses per year P600,000 It has been estimated that during a temporary shutdown o four months, fixed costs and expenses can be reduced by 20%, although additional costs of maintenance and security of P18,000 has to be incurred. REQUIRED: 1. At what point in units would loss from operations be equal to shutdown costs? Prove by preparing an income statement. 2. How many units must be sold to avoid a loss? Prove also the answer by preparing an income statement. 3. How much is the net advantage or disadvantage of shutting down during the 4- month period? 4. Assuming that the additional cost for security will not change at P18,000, compute again for shutdown point, if the shutdown would be: a. Three months b. Six months c. Five months d. One year
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