The following 20X1 information of Asahi Enterprise is available: 

Pre-tax operating profit P 60,000,000

Depreciation expense 15,000,000

Change in net working capital 10,000,000

Capital expenditures 12,000,000

Invested capital (Total assets – Current liabilities) 100,000,000

Current liabilities 20,000,000

Weighted – average cost of capital 10%

Income tax rate 40%

What is the free cash flow (FCF) for 20X1?

Clay Co. has considerable excess manufacturing capacity. A special job order’s cost sheet includes the following applied manufacturing overhead costs:

Fixed costs P 21,000

Variable costs 33,000

The fixed costs include a normal P3,700 allocation for in-house design costs, although no in-house design will be done. Instead, the job will require the use of external designers costing P7,750. What is the total amount to be included in the calculation to determine the minimum acceptable price for the job?

Truz Division of Teasen Corporation produces electric motors, 20% of which are sold to Teddy Division of Teasen Corporation and the remainder to outside customers. Teasen Corporation treats its divisions as profit centers and allows division managers to choose their sources of sale and supply. Corporate policy requires all interdivisional sales and purchases to be recorded at variable cost as a transfer price. Truz Division’s estimated sales and standard cost data for the year ending December 31, 20X1, based on the full capacity of 100,000 units, are as follows:

Teddy

Outsiders

Sales

P900,000 - T

P8,000,000 - O

Variable Costs

(900,000) - T

(3,600,000) - O

Fixed Costs

(300,000) - T

(1,200,000) - O

Gross Margin

(P300,000) - T

P3,200,000 - O

Unit Sales

20,000 - T

80,000 - O

Truz has an opportunity to sell the above 20,000 units to an outside customer at P75 per unit during 20X0 continuingly. Teddy can purchase its requirements from an outside supplier at P85 per unit. 

Assuming that Truz desires to maximize its gross margin, should it take on the new customer and drop its sales to Teddy for 20X1, and why?

ABC Company manufactures one (1) product. Its sales price is expected to be P40 per unit. Actual sales for November 201A are 1,550 units and 1,700 units for December 201A. ABC budgets its sales for the next six (6) months for 201B: January – 675; February – 650; March – 688; April – 625.

All sales are on account. ABC collects its accounts as follows: 70% in the month of sale, 20% in the month following the sale, and 10% in the second month following the sale. Uncollectible accounts are negligible and can be disregarded. The beginning inventory on January 1, 201B is 68 units. ABC desires an ending inventory of 10% of the next month’s budgeted sales.  Determine the sales budget for the first quarter of 201B.

Lorreyn Company uses flexible budgeting for cost control. Lorreyn produced 10,800 units of product during October, incurring indirect materials costs of P13,000. Its master budget for the year reflected indirect materials costs of P180,000 at production volume of 144,000. What is the indirect materials cost that shall be reflected in the October’s production flexible budget?

The management of Park John Corporation (PJC) has decided to implement a transfer pricing system. PJC’s Management Information System (MIS) department is currently negotiating a transfer price for its services with the four (4) producing divisions of the company and the marketing department. Charges will be assessed based on the number of reports (assume that all reports require the same amount of time and resources to produce). 

The cost to operate the MIS department at its full capacity of 1,000 reports per year is budgeted at P45,000. The user subunits expect to request 250 reports each this year. The cost of temporary labor and additional facilities used to produce reports beyond capacity is budgeted at P48.00 per report. PJC could purchase the same services from an external Information Services firm for P70,000. 

What amounts should be used as the ceiling and floor to determine the negotiated transfer price?

A company has budgeted sales for 20X1:

1^st Quarter 12,000

2^nd Quarter 14,000

3^rd Quarter 18,000

4^th Quarter 16,000

The ending finished goods inventory for each month equals 25% of the next quarter’s budgeted unit sales. Additionally, four (4) pounds of raw materials are required for each finished unit produced. The ending raw materials inventory for each month equals 10% of the next month’s production requirements. What is the budgeted or scheduled production for the 3^rd Quarter?

The following 20X1 information of Asahi Enterprise is available: 

Pre-tax operating profit. P60,000,000

Depreciation expense 15,000,000

Change in net working capital 10,000,000

Capital expenditures 12,000,000

Invested capital (Total assets – Current liabilities) 100,000,000

Current liabilities 20,000,000

Weighted – average cost of capital 10%

Income tax rate 40%

What is the amount of economic value added (EVA)?

 The balanced scorecard generally uses performance measures with four (4) different perspectives. Which of the following performance measures would be part of those used for the internal business processes perspective?