Question on image

Philco Fire Alarms has a factory in Ft. Saskatchewan with a maximum capacity of 9,000 MH's per month. Philco currently has a monthly budget of 8,500 MH's. Per unit cost data for their light industrial fire alarms is as follows: Direct Materials per unit $22.00 Direct Labour 18.00 Variable Selling and Administration 7.00 Total Manufacturing Overhead 20.00 Total Costs per unit $67.00 It requires 6 minutes of machine time (.1 MH) to produce one alarm. Fixed overhead is allocated at $80 per MH. The normal selling price for an alarm is $75. K-Co Construction has offered to buy 25,000 alarms at an offer price of $62.00 per unit. There would be no variable selling and administration costs if the order was accepted. Question #6 - Should Philco accept the K-Co offer? If Philco were to accept what would the effect on operating income? (6 marks)Philco Fire Alarms has a factory in Ft. Saskatchewan with a maximum capacity of 9,000 MH's per month. Philco currently has a monthly budget of 8,500 MH's. Per unit cost data for their light industrial fire alarms is as follows: Direct Materials per unit $22.00 Direct Labour 18.00 Variable Selling and Administration 7.00 Total Manufacturing Overhead 20.00 Total Costs per unit $67.00 It requires 6 minutes of machine time (.1 MH) to produce one alarm. Fixed overhead is allocated at $80 per MH. The normal selling price for an alarm is $75. K-Co Construction has offered to buy 25,000 alarms at an offer price of $62.00 per unit. There would be no variable selling and administration costs if the order was accepted. Question #7 - Several days later K-Co calls Philco with a reduced order for 20,000 units. The product is the same as above except that K-Co also wants to add a carbon monoxide (CO) component that would cost Philco $8 per unit plus a machine rental of $25,000 to produce. They have increased their offer price to $70.00 per unit. Should Philco accept K-Co's new offer? If Philco were to accept what would be the effect on operating income? (4 marks)Philo Fans manufactures the motors for the 10,000 ceiling fans it sells each month. The cost information for these motors is as follows: Direct Materials per unit $15.00 Direct Labor per unit 30.00 Manufacturing Overhead per unit 12.00 Total Manufacturing Costs per unit $57.00 The accounting department noted that 30% of the manufacturing overhead was fixed. Jenco Electronics has offered to sell Philco the 10,000 motors it needs each month for $60 per unit. If Philco accepted the offer 25% of the total dollars of fixed manufacturing overhead could be avoided. In addition, the newly available plant facilities could be used to produce bladeless (air multiplier) fans. The marketing department has provided the following estimates for this new fan type: Sales (units per month) 4,000 Sales Revenue per unit $75.00 Direct Materials per unit 5.00 Direct Labor per unit 45.00 Variable Overhead per unit 6.00 Question #8 - Determine if Philco should continue to produce fan motors itself or outsource them from Jenco Electronics. (6 marks)Philo Fans manufactures the motors for the 10,000 ceiling fans it sells each month. The cost information for these motors is as follows: Direct Materials per unit $15.00 Direct Labor per unit 30.00 Manufacturing Overhead per unit 12.00 Total Manufacturing Costs per unit $57.00 The accounting department noted that 30% of the manufacturing overhead was fixed. Jenco Electronics has offered to sell Philco the 10,000 motors it needs each month for $60 per unit. If Philco accepted the offer 25% of the total dollars of fixed manufacturing overhead could be avoided. In addition, the newly available plant facilities could be used to produce bladeless (air multiplier) fans. The marketing department has provided the following estimates for this new fan type: Sales (units per month) 4,000 Sales Revenue per unit $75.00 Direct Materials per unit 5.00 Direct Labor per unit 45.00 Variable Overhead per unit 6.00 Question #9 - At what level of production would Philco be indifferent between making the motors itself or outsourcing them from Jenco? Calculate your answer to the nearest unit. (4 marks)