Chapter 16 Practice - Part 1 17 Required Information The following information applies to the questions displayed below) Petro Motors Inc. (PMD produces small gasoline-powered mots for use in low mower. The company has been growing steadily over the past five years and is operating at capacity. PM recently completed the doon of new plant und equpinerit at a cost of 57.800.000, thereby increasing its manufacturing capacity to 100.000 m anns. The addition to plant and equipment will be depreciated on a straight line basis over 10 years. Part 5 of 6 0.78 points Sales of motors were 60.000 units prior to the completion of the additional capacity. Cost records indicated that manufacturing costs had totaled $60 per motor, of which $48 per motor was considered to be variable manufacturing costs. PMI has used the volume of activity at full capacity as the basis for applying fed manufacturing ovethead. The normal selling price is $80 per motor, and PMI pays a 5% commission on the sale of its motors LawnPro.com offered to purchase 35,000 motors at a price of $60 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 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 PM No commissions will be paid on this special sales order and freight charges will be paid by the customer purchasing a motor. ebook Print References 1. Assume that with the additional plant capacity, sales of motors in PMI's regular market are expected to increase by 33 13% in the coming 12 months. Identify all the relevant costs that PMI should consider in evaluating the special sales order from Lawn Pro.com (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correcte and double click the box with the question mark to empty the box for a wrong answer. Any boxes with a question mark will be automatically graded as incorrect.) 2 Variable manufacturing costs per motor 2 Costs associated with storing the motors in the PM Warehouse 10 wa shipment Fixed costs coorde Commisions and freight An opportunity cost equal to the amount of contribution foregoner PM were to accept Next > 1 18 of 19 Complete this question by entering your answers in the tabs below. ReqA RegB ReqC and D Identify whether each of these operating expenses is relevant to the decision of bar operation, if relevant, provide the relevant values Sales Cost of sales Food service items ces Wages for part time employees Us Convenience operation manager's salary General manager's salary Advertising Insurance Property taxes Food equipment depreciation Building depreciation ReqC and D > ( Reg A NO Required: Q. From the preceding information, calculate the operating income from the soup, sandwich, and snack bar operation that has caught the general manager's attention b. Identify whether each of these operating expenses is relevant to the decision of discontinuing the soup. Sandwich and snackbar operation, if relevant, provide the relevant values. C. IT MMV discontinues the soup, sandwich, and snack bar operation, how much will operating income increase or decrease for the location? d. Should MMV continue or discontinue the soup, sandwich, and snack bar operation at this location? Complete this question by entering your answers in the tabs below. Req A ReqB Reg C and D C. If MMV discontinues the soup, sandwich, and snack bar operation, how much will operating income increase or decrease for this location? 2. Should MMV continue or discontinue the soup, sandwich, and snack bar operation at this location in operating income the convenience operation d. MMV should
