John Boyd Corporation manufactures and sells 1,000 tractors each month. The primary component in each tractor is the motor. John Boyd has the monthly capacity to produce 1,300 motors. The variable costs associated with manufacturing each motor are shown below: Direct materials $ 24 Direct labor $ 16 Variable manufacturing overhead $ 29 Fixed manufacturing overhead per month (for up to 1,300 units of production) averages $27,000. Joan Reid, Inc. has offered to purchase 200 motors from John Boyd per month to be used in its own outboard motors. Assuming John Boyd wants to earn a pretax profit of $10,000 on this special order, what price must it charge Joan Reid?
John Boyd Corporation manufactures and sells 1,000 tractors each month. The primary component in each tractor is the motor. John Boyd has the monthly capacity to produce 1,300 motors. The variable costs associated with manufacturing each motor are shown below: Direct materials $ 24 Direct labor $ 16 Variable manufacturing overhead $ 29 Fixed manufacturing overhead per month (for up to 1,300 units of production) averages $27,000. Joan Reid, Inc. has offered to purchase 200 motors from John Boyd per month to be used in its own outboard motors. Assuming John Boyd wants to earn a pretax profit of $10,000 on this special order, what price must it charge Joan Reid?
Chapter1: Financial Statements And Business Decisions
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John Boyd Corporation manufactures and sells 1,000 tractors each month. The primary component in each tractor is the motor. John Boyd has the monthly capacity to produce 1,300 motors. The variable costs associated with manufacturing each motor are shown below:
| Direct materials | $ | 24 | |
| Direct labor | $ | 16 | |
| Variable manufacturing |
$ | 29 | |
Fixed manufacturing overhead per month (for up to 1,300 units of production) averages $27,000. Joan Reid, Inc. has offered to purchase 200 motors from John Boyd per month to be used in its own outboard motors.
Assuming John Boyd wants to earn a pretax profit of $10,000 on this special order, what price must it charge Joan Reid?
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