9. FAIRY DRAGON CORP. has been producing two bearings, components B12 and B18, for use in production, data regarding these two components are: B12 2.5 B18 3.0 Machine hours required per unit Standard cost per unit Direct Material Direct labor Manufacturing overhead Variable* Fixed** P2.25 P3.75 4.00 4.50 2.00 3.75 P12.00 2.25 4.50 P15.00 *Variable manufacturing overhead is applied on the basis of direct labor hours. **Fixed manufacturing overhead is applied on the basis of machine hours. FAIRY DRAGON's annual requirement for these components is 8,000 units of B12 and 11,000 units of B18. Recently, FAIRY DRAGON's management decided to devote additional machine time to other product lines resulting in only 41,000 machine hours per year that can be dedicated to the production of the bearings. An outside company has offered to sell FAIRY DRAGON the annual supply of the bearings at prices of P11.25 for B12 and P13.50 for B18. FAIRY DRAGON wants to schedule the otherwise idle 41,000 machine hours to produce bearings so that the company can minimize its costs (maximize its net benefits). REQUIREMENTS: (a) The net benefit (loss) per machine hour that would result if FAIRY DRAGON accepts the supplier's offer of P13.50 per unit for component B18 is (b) How many units of B12 and B18 should the company purchased or produced to maximize its net benefits?
9. FAIRY DRAGON CORP. has been producing two bearings, components B12 and B18, for use in production, data regarding these two components are: B12 2.5 B18 3.0 Machine hours required per unit Standard cost per unit Direct Material Direct labor Manufacturing overhead Variable* Fixed** P2.25 P3.75 4.00 4.50 2.00 3.75 P12.00 2.25 4.50 P15.00 *Variable manufacturing overhead is applied on the basis of direct labor hours. **Fixed manufacturing overhead is applied on the basis of machine hours. FAIRY DRAGON's annual requirement for these components is 8,000 units of B12 and 11,000 units of B18. Recently, FAIRY DRAGON's management decided to devote additional machine time to other product lines resulting in only 41,000 machine hours per year that can be dedicated to the production of the bearings. An outside company has offered to sell FAIRY DRAGON the annual supply of the bearings at prices of P11.25 for B12 and P13.50 for B18. FAIRY DRAGON wants to schedule the otherwise idle 41,000 machine hours to produce bearings so that the company can minimize its costs (maximize its net benefits). REQUIREMENTS: (a) The net benefit (loss) per machine hour that would result if FAIRY DRAGON accepts the supplier's offer of P13.50 per unit for component B18 is (b) How many units of B12 and B18 should the company purchased or produced to maximize its net benefits?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Question
Transcribed Image Text:FAIRY DRAGON CORP. has been producing two bearings, components B12 and B18, for use in
production, data regarding these two components are:
B12
B18
Machine hours required per unit
Standard cost per unit
Direct Material
Direct labor
2.5
3.0
P2.25
P3.75
4.00
4.50
Manufacturing overhead
Variable*
Fixed**
2.00
2.25
4.50
P15.00
3.75
P12.00
*Variable manufacturing overhead is applied on the basis of direct labor hours.
**Fixed manufacturing overhead is applied on the basis of machine hours.
FAIRY DRAGON's annual requirement for these components is 8,000 units of B12 and 11,000 units of
B18. Recently, FAIRY DRAGON's management decided to devote additional machine time to other
product lines resulting in only 41,000 machine hours per year that can be dedicated to the production
of the bearings. An outside company has offered to sell FAIRY DRAGON the annual supply of the
bearings at prices of P11.25 for B12 and P13.50 for B18. FAIRY DRAGON wants to schedule the
otherwise idle 41,000 machine hours
(maximize its net benefits).
REQUIREMENTS:
The net benefit (loss) per machine hour that would result if FAIRY DRAGON accepts the supplier's
produce bearings so that the company can minimize its costs
(a)
offer of P13.50 per unit for component B18 is
(b)
How many units of B12 and B18 should the company purchased or produced to maximize its net
benefits?
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