40. What will be the total variable manufacturing costs for the subsequent, recurring 500-box
orders?
a. P180,480 c. P287,280
b. P373,464 d. P191,280
ITEMS 41 and 42 ARE BASED ON THE FOLLOWING INFORMATION:
Jane Corporation produces wood glue that is used by furniture manufacturers. The company
normally produces and sells 10,000 gallons of the glue each month. White Glue is sold for P280 per
gallon, variable costs is P168 per gallon, fixed factory overhead cost totals P460,000 per month, and
the fixed selling costs totals P620,000 per month.
Labor strikes in the furniture manufacturers that buy the bulk of White Glue have caused
the monthly sales of Jane Corporation to temporarily decrease to only 15% of its normal
monthly volume. Jane Corporation’s management expects that the strikes will last for
about 2 months, after which, sales of White Glue should return to normal. However, due
to the dramatic drop in the sales level, Jane Corporation’s management is considering to
close down its plant during the two-moth period that the strikes are on.
If Jane Corporation will temporarily shut down its operations, it is expected that the fixed
factory overhead costs can be reduced to P340,000 per month and that the fixed selling
costs can be reduced by P62,000 per month. Start-up costs at the end of the shut-down
period would total P56,000. Jane Corporation uses the JIT system, so no inventories are
on hand.
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