Bacrometer, Inc., makes part no. 566 on one of its production lines. Each month Bacrometer makes 6,000 of part no. 566 at a variable cost of $4 per part. Bacrometer has been provided a bid for part no. 566 from another manufacturer that will make the part for $5 per part. Bacrometer knows the production line could be rented to another manufacturer for $8,000 per month. Fixed costs associated with the production line will remain unchanged regardless of the company's decision.

a.What is the incremental cost to make with the incremental cost to buy. Remember the incremental cost to make includes the opportunity cost of the foregone rent revenue.

b.Should Bacrometer continue to make part no. 566?

Gunst Company produces three video games: Android, Bio-Mutant, and Cyclops. Cost and revenue data pertaining to each product are as follows.

AndroidBio-MutantCyclops

Selling price$100$60$125

Direct labor482460

Direct material9816

Variable overhead749

Required:

At the present time, demand for each of the company's products far exceeds its capacity to produce them. Thus, management is trying to determine which of its games to concentrate on next week in filling its backlog of orders. Gunst's direct labor rate is $12 per hour, and only 1,000 hours of direct labor are available each week.

What is the maximum total contribution margin the company can make by its best use of the 1,000 available hours.