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The Engine Guys produces specialized engines for "snow climber" buses. The company's normal monthly production volume is 7,500 engines, whereas its monthly production capacity is 15,000 engines. The current selling price per engine is $1,150. The cost per unit of manufacturing and marketing the engines at the normal volume is as follows: Manufacturing costs: Direct materials Direct labour Variable overhead Fixed overhead Subtotal Marketing costs: Variable Fixed Subtotal Total unit cost " Costs per Unit for Engines Incremental benefit of the contract $ 102 184 31 184 $501 $ 58 127 185 $686 Required: Answer the following independent questions. 4 1-8. The Provincial Bus Company wishes to purchase 710 engines in October. The bus company is willing to pay a fixed fee of $900,000 and reimburse The Engine Guys for all manufacturing costs incurred to manufacture 710 motors. October is a busy month for The Engine Guys, and there are sufficient orders to operate at 100% capacity utilization. There will be no variable marketing costs on this government contract. Compute the incremental benefit of the contract. S 415,070

The Engine Guys produces specialized engines for "snow climber" buses. The company's normal monthly production volume is 7,500 engines, whereas its monthly production capacity is 15,000 engines. The current selling price per engine is $1,150. The cost per unit of manufacturing and marketing the engines at the normal volume is as follows: Manufacturing costs: Direct materials Direct labour Variable overhead Fixed overhead Subtotal Marketing costs: Variable Fixed Subtotal Total unit cost " Costs per Unit for Engines Incremental benefit of the contract $ 102 184 31 184 $501 $ 58 127 185 $686 Required: Answer the following independent questions. 4 1-8. The Provincial Bus Company wishes to purchase 710 engines in October. The bus company is willing to pay a fixed fee of $900,000 and reimburse The Engine Guys for all manufacturing costs incurred to manufacture 710 motors. October is a busy month for The Engine Guys, and there are sufficient orders to operate at 100% capacity utilization. There will be no variable marketing costs on this government contract. Compute the incremental benefit of the contract. S 415,070

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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N 1-b. Indicate whether the Provincial Bus Company's contract should be accepted. O Yes O No 2-a. An outside contractor is willing to supply 3,750 engines at a price of $552 per unit. If the offer is accepted, the company will make 3,750 engines in-house and buy 3,750 engines from the contractor. The company's fixed manufacturing costs will decline by 20% and the variable marketing costs per unit on the 3,750 engines purchased will decline by 40%. Calculate the cost in each option. (Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required.) Purchase cost Variable manufacturing Fixed manufacturing Variable marketing Fixed marketing Cost of option Difference in favour of make option Buy 3,750 units and make 3,750 units Yes No Make 7,500 units 2-b. Determine whether the contractor's offer should be accepted? Prev
Transcribed Image Text:N 1-b. Indicate whether the Provincial Bus Company's contract should be accepted. O Yes O No 2-a. An outside contractor is willing to supply 3,750 engines at a price of $552 per unit. If the offer is accepted, the company will make 3,750 engines in-house and buy 3,750 engines from the contractor. The company's fixed manufacturing costs will decline by 20% and the variable marketing costs per unit on the 3,750 engines purchased will decline by 40%. Calculate the cost in each option. (Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required.) Purchase cost Variable manufacturing Fixed manufacturing Variable marketing Fixed marketing Cost of option Difference in favour of make option Buy 3,750 units and make 3,750 units Yes No Make 7,500 units 2-b. Determine whether the contractor's offer should be accepted? Prev
The Engine Guys produces specialized engines for "snow climber" buses. The company's normal monthly production volume is 7,500 engines, whereas its monthly production capacity is 15,000 engines. The current selling price per engine is $1,150. The cost per unit of manufacturing and marketing the engines at the normal volume is as follows: Manufacturing costs: Direct materials Direct labour Variable overhead Fixed overhead Subtotal Marketing costs: Variable Fixed Subtotal Total unit cost 3 Costs per Unit for Engines Incremental benefit of the contract $102 184 31 184 $501 $ 58 127 185 $686 Required: Answer the following independent questions. 1-8. The Provincial Bus Company wishes to purchase 710 engines in October. The bus company is willing to pay a fixed fee of $900,000 and reimburse The Engine Guys for all manufacturing costs incurred to manufacture 710 motors. October is a busy month for The Engine Guys, and there are sufficient orders to operate at 100% capacity utilization. There will be no variable marketing costs on this government contract. Compute the incremental benefit of the contract. $ 415,070
Transcribed Image Text:The Engine Guys produces specialized engines for "snow climber" buses. The company's normal monthly production volume is 7,500 engines, whereas its monthly production capacity is 15,000 engines. The current selling price per engine is $1,150. The cost per unit of manufacturing and marketing the engines at the normal volume is as follows: Manufacturing costs: Direct materials Direct labour Variable overhead Fixed overhead Subtotal Marketing costs: Variable Fixed Subtotal Total unit cost 3 Costs per Unit for Engines Incremental benefit of the contract $102 184 31 184 $501 $ 58 127 185 $686 Required: Answer the following independent questions. 1-8. The Provincial Bus Company wishes to purchase 710 engines in October. The bus company is willing to pay a fixed fee of $900,000 and reimburse The Engine Guys for all manufacturing costs incurred to manufacture 710 motors. October is a busy month for The Engine Guys, and there are sufficient orders to operate at 100% capacity utilization. There will be no variable marketing costs on this government contract. Compute the incremental benefit of the contract. $ 415,070
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