Question
The Engine Guys produces specialized engines for snow climber buses . The company's normal monthly production volume is 7000 engines, whereas its monthly
The Engine Guys produces specialized engines for " snow climber " buses . The company's normal monthly production volume is 7000 engines, whereas its monthly production capacity is 14,000 engines . The current selling price per engine is $ 1,100 . The cost per unit of manufacturing and marketing the engines at the normal volume is as follows :
Costs per Unit for Engines
Manufacturing costs :
Direct materials $ 100
Direct labour 176
Variable overhead 30
Fixed overhead 176
Subtotal $ 482
Marketing costs :
Variable $55
Fixed $ 121
Subtotal $ 176
Total unit cost $ 658
Required :
Answer the following independent questions
1 - a . The Provincial Bus Company wishes to purchase 700 engines in October . The bus company is willing to pay a fixed fee of $840,00 and reimburse The Engine Guys for all manufacturing costs incurred to manufacture 700 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 .
Incremental benefit contract ___ ??
2. Which orders would you recommend that the company work on next week - the orders for product A , product B or product C ?
(a)Product A
(b)Product B
(c)Product C
3. A foreign supplier could furnish Barlow with additional stocks of the raw material at a substantial premium over the usual price. If there is unfilled demand for all three products , what is the highest price that Barlow Company should be willing to pay for an additional kilogram of materials? (Do not round Intermediate calculations Round your answer to 2 decimal places.)
Highest price per kilogram___ ??
4. Assume that direct labour becomes a constraint instead of direct materials . How will your answer to Requirement ( 2 ) above change ?
(a)Product A
(b)Product B
(c)Product C
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