1. Jerry Company budget sales of 400,000 plastic gums at P40 per unit for 2013.

Variable manufacturing costs were budgeted at P16 per unit, and fixed
manufacturing costs at P10 per unit. A special order offering to buy 40,000 plastic
gums for P23 each was received by Jerry in March, 2013. Jerry has sufficient plant
capacity to manufacture the additional quantity: however, the production would
have to be done on an overtime basis at an estimated additional cost of P3 per
plastic gums. Acceptance of the special order would not affect Jerrys normal sales
and no selling expenses would be incurred. What would be the effect on operating
profit if the special order were accepted?

2. Chow Inc has its own coffee shop with the following annual costs:

Food 400,000

Labor 300,000

Overhead 440,000

Capital 1,140,000

The overhead is 40% fixed. At the fixed overhead, P100,000 is the salary of the
coffee shop supervisor. The remainder of the fixed overhead has been allocated
from total company overhead. Assuming the coffee shop supervisor will remain
and that Chow will continue to pay said salary, the maximum cost Chow will be
willing to pay an outside firm to service the coffee shop is;
3. Syanton manufacture a particular computer component. Manufacturing costs
per unit are as follows:

Direct materials 50
Direct labor 500
Variable overhead 250
Fixed overhead 400
Fredix, Inc has contacted Syanton with an offer to sell 10,000 of the component
for P1,100 per unit. If Syanton accepts the proposal, P2500,000 of the fixed
overhead will be eliminated. Should Syanton make or buy the component and
why?
4. Tagaytay Open Air Flea Market is along the highway leading to Taal Vista
Lodge. Arnel has a stall which specializes in hand-crafted fruit baskets that sells for
P60 each. Daily fixed costs are P15,000 and variable costs are P30 per basket. An
average of 750 baskets are sold each day. Arnel has a capacity of 800 baskets per
day. By closing time yesterday, a bus load of teachers who attended a seminar at
the Development Academy of the Philippines stopped by Arnels stall. Collectively,
they offered Arnel P1,500 for 40 baskets. Arnel should have.