10.8 The GB Company manufactures a variety of electric motors. The business is currently operating at about 70 per cent of capacity and is earning a satisfactory return on investment. International Industries (II) has approached the management of GB with an offer to buy 120,000 units of an electric motor. II manufactures a motor that is almost identical to GB's motor, but a fire at the Il plant has shut down its manufacturing operations. Il needs the 120,000 motors over the next four months to meet commitments to its regular customers; Il is prepared to pay £19 each for the motors, which it will collect from the GB plant. GB's product cost, based on current planned cost for the motor, is: Direct materials Direct labour (variable) Manufacturing overheads Total £ 5.00 6.00 9.00 20.00
10.8 The GB Company manufactures a variety of electric motors. The business is currently operating at about 70 per cent of capacity and is earning a satisfactory return on investment. International Industries (II) has approached the management of GB with an offer to buy 120,000 units of an electric motor. II manufactures a motor that is almost identical to GB's motor, but a fire at the Il plant has shut down its manufacturing operations. Il needs the 120,000 motors over the next four months to meet commitments to its regular customers; Il is prepared to pay £19 each for the motors, which it will collect from the GB plant. GB's product cost, based on current planned cost for the motor, is: Direct materials Direct labour (variable) Manufacturing overheads Total £ 5.00 6.00 9.00 20.00
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 11E
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