The Engine Guys produces specialized engines for "snow climber" buses. The company's normal monthly production volume is 10.500 engines, whereas its monthly production capacity is 21,000 engines. The current selling price per engine is $1.450. 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 $ 114 232 37 232 $ 615 $ 72 160 232 S 847 Required: Answer the following independent questions. 1-0. The Provincial Bus Company wishes to purchase 770 engines in October. The bus company is willing to pay a fixed fee of $1.260,000 and reimburse The Engine Guys for all manufacturing costs incurred to manufacture 770 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
The Engine Guys produces specialized engines for "snow climber" buses. The company's normal monthly production volume is 10.500 engines, whereas its monthly production capacity is 21,000 engines. The current selling price per engine is $1.450. 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 $ 114 232 37 232 $ 615 $ 72 160 232 S 847 Required: Answer the following independent questions. 1-0. The Provincial Bus Company wishes to purchase 770 engines in October. The bus company is willing to pay a fixed fee of $1.260,000 and reimburse The Engine Guys for all manufacturing costs incurred to manufacture 770 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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:12
01:16:27
eBook
MH Lab 3: Relevant Costing
1-b. Indicate whether the Provincial Bus Company's contract should be accepted.
Ⓒ Yes
O No
2-a. An outside contractor is willing to supply 5,250 engines at a price of $696 per unit. If the offer is accepted, the company will make
5,250 engines in-house and buy 5,250 engines from the contractor. The company's fixed manufacturing costs will decline by 20% and
the variable marketing costs per unit on the 5,250 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 5,250
units and
make 5,250
units
O Yes
O No
Make 10,500
units
$
$
$
3,633,000
388,500
2,436,000
756,000
1,680,000
Saved
847
847
2-b. Determine whether the contractor's offer should be accepted?
Transcribed Image Text:12
01:17:05
eBook
The Engine Guys produces specialized engines for "snow climber" buses. The company's normal monthly production volume is 10.500
engines, whereas its monthly production capacity is 21,000 engines. The current selling price per engine is $1.450. 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
$ 114
232
37
232
$ 615
incremental benefit of the contract
$ 72
160
232
$ 847
Required:
Answer the following independent questions.
1-0. The Provincial Bus Company wishes to purchase 770 engines in October. The bus company is willing to pay a fixed fee of
$1,260,000 and reimburse The Engine Guys for all manufacturing costs incurred to manufacture 770 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
371,910
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