Required information Problem 16-30 (Algo) Relevant costs, special sales order-idle versus full capacity LO 2, 3 [The following information applies to the questions displayed below.] Petro Motors Inc. (PMI) produces small gasoline-powered motors for use in lawn mowers. The company has been growing steadily over the past five years and is operating at full capacity. PMI recently completed the addition of new plant and equipment at a cost of $10,000,000, thereby increasing its manufacturing capacity to 122,000 motors annually. The addition to plant and equipment will be depreciated on a straight-line basis over 10 years. Sales of motors were 71,000 units prior to the completion of the additional capacity. Cost records indicated that manufacturing costs had totaled $71 per motor, of which $59 per motor was considered to be variable manufacturing costs. PMI has used the volume of activity at full capacity as the basis for applying fixed manufacturing overhead. The normal selling price is $102 per motor, and PMI pays a 5% commission on the sale of its motors. LawnPro.com offered to purchase 46,000 motors at a price of $71 per unit to test the viability of distributing lawn mower replacement motors through its website. PMI would be expected to produce the motors, store them in its warehouse, and ship individual motors to LawnPro.com customers. As orders are placed directly through the LawnPro.com website, they would be forwarded instantly to PMI. No commissions will be paid on this special sales order, and freight charges will be paid by the customer purchasing a motor. Problem 16-30 (Algo) Part a Required: a. Calculate the cost per motor, for cost accounting purposes, after completion of the additional plant capacity. Cost per motor
Required information Problem 16-30 (Algo) Relevant costs, special sales order-idle versus full capacity LO 2, 3 [The following information applies to the questions displayed below.] Petro Motors Inc. (PMI) produces small gasoline-powered motors for use in lawn mowers. The company has been growing steadily over the past five years and is operating at full capacity. PMI recently completed the addition of new plant and equipment at a cost of $10,000,000, thereby increasing its manufacturing capacity to 122,000 motors annually. The addition to plant and equipment will be depreciated on a straight-line basis over 10 years. Sales of motors were 71,000 units prior to the completion of the additional capacity. Cost records indicated that manufacturing costs had totaled $71 per motor, of which $59 per motor was considered to be variable manufacturing costs. PMI has used the volume of activity at full capacity as the basis for applying fixed manufacturing overhead. The normal selling price is $102 per motor, and PMI pays a 5% commission on the sale of its motors. LawnPro.com offered to purchase 46,000 motors at a price of $71 per unit to test the viability of distributing lawn mower replacement motors through its website. PMI would be expected to produce the motors, store them in its warehouse, and ship individual motors to LawnPro.com customers. As orders are placed directly through the LawnPro.com website, they would be forwarded instantly to PMI. No commissions will be paid on this special sales order, and freight charges will be paid by the customer purchasing a motor. Problem 16-30 (Algo) Part a Required: a. Calculate the cost per motor, for cost accounting purposes, after completion of the additional plant capacity. Cost per motor
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![Required information
Problem 16-30 (Algo) Relevant costs, special sales order-idle versus full capacity LO 2, 3
[The following information applies to the questions displayed below.]
Petro Motors Inc. (PMI) produces small gasoline-powered motors for use in lawn mowers. The company has been
growing steadily over the past five years and is operating at full capacity. PMI recently completed the addition of new
plant and equipment at a cost of $10,000,000, thereby increasing its manufacturing capacity to 122,000 motors annually.
The addition to plant and equipment will be depreciated on a straight-line basis over 10 years.
Sales of motors were 71,000 units prior to the completion of the additional capacity. Cost records indicated that
manufacturing costs had totaled $71 per motor, of which $59 per motor was considered to be variable manufacturing
costs. PMI has used the volume of activity at full capacity as the basis for applying fixed manufacturing overhead. The
normal selling price is $102 per motor, and PMI pays a 5% commission on the sale of its motors.
LawnPro.com offered to purchase 46,000 motors at a price of $71 per unit to test the viability of distributing lawn mower
replacement motors through its website. PMI would be expected to produce the motors, store them in its warehouse,
and ship individual motors to LawnPro.com customers. As orders are placed directly through the LawnPro.com website,
they would be forwarded instantly to PMI. No commissions will be paid on this special sales order, and freight charges
will be paid by the customer purchasing a motor.
Problem 16-30 (Algo) Part a
Required:
a. Calculate the cost per motor, for cost accounting purposes, after completion of the additional plant capacity.
Cost per motor](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc6417a73-df1a-49f0-a1f4-45b871598085%2Fa4f45035-6b6c-43a7-baf8-afb84e22176e%2Fldoibgn_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
Problem 16-30 (Algo) Relevant costs, special sales order-idle versus full capacity LO 2, 3
[The following information applies to the questions displayed below.]
Petro Motors Inc. (PMI) produces small gasoline-powered motors for use in lawn mowers. The company has been
growing steadily over the past five years and is operating at full capacity. PMI recently completed the addition of new
plant and equipment at a cost of $10,000,000, thereby increasing its manufacturing capacity to 122,000 motors annually.
The addition to plant and equipment will be depreciated on a straight-line basis over 10 years.
Sales of motors were 71,000 units prior to the completion of the additional capacity. Cost records indicated that
manufacturing costs had totaled $71 per motor, of which $59 per motor was considered to be variable manufacturing
costs. PMI has used the volume of activity at full capacity as the basis for applying fixed manufacturing overhead. The
normal selling price is $102 per motor, and PMI pays a 5% commission on the sale of its motors.
LawnPro.com offered to purchase 46,000 motors at a price of $71 per unit to test the viability of distributing lawn mower
replacement motors through its website. PMI would be expected to produce the motors, store them in its warehouse,
and ship individual motors to LawnPro.com customers. As orders are placed directly through the LawnPro.com website,
they would be forwarded instantly to PMI. No commissions will be paid on this special sales order, and freight charges
will be paid by the customer purchasing a motor.
Problem 16-30 (Algo) Part a
Required:
a. Calculate the cost per motor, for cost accounting purposes, after completion of the additional plant capacity.
Cost per motor
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education