The Galbraith Compa apen with Google Docs, lof electric motors. The business is currently operating about 70 per cent of capacity and is earning a satisfactory return on investment International Industries - Holborn has approached the management of Galbraith with an offer to buy 120,000 units of an electric motor. Holborn manufactures a motor that is almost identical to Galbraith 's motor but a fire at the Holborn plant has shut down its manufacturing operations. Holborn needs the 120,000 over the next four months to meet commitments to its regular customers; Holborn is prepared to pay 19 each for the motors, which it will collect from the Galbraith plant. Galbraith 's product cost, based on current planned cost for the motor, is: Direct materials Direct labour (Variable) Manufacturing overheads Total 5 6 9 20 Manufacturing overheads are applied to production at the rate of 18 a direct labour hour. This overheads rate is made up of the following components: Variable factory overhead Fixed factory overhead - Direct Allocated Applied manufacturing overhead rate 6 8 4 18 In determining selling prices Galbraith adds a 40 per cent mark-up to the product cost. This provides a suggested selling price of 28 for the motor. The marketing department, however has set the current selling price at 27 to maintain market share. The order would, however require additional fixed factory overheads of 15,000 a month in the form of supervision and clerical costs. If management accepts the order, Page o zhotbrs Sill be maQactuted and delivered to Holborn each month for the next four months. The Galbraith Compa apen with Google Docs, lof electric motors. The business is currently operating about 70 per cent of capacity and is earning a satisfactory return on investment International Industries - Holborn has approached the management of Galbraith with an offer to buy 120,000 units of an electric motor. Holborn manufactures a motor that is almost identical to Galbraith 's motor but a fire at the Holborn plant has shut down its manufacturing operations. Holborn needs the 120,000 over the next four months to meet commitments to its regular customers; Holborn is prepared to pay 19 each for the motors, which it will collect from the Galbraith plant. Galbraith 's product cost, based on current planned cost for the motor, is: Direct materials Direct labour (Variable) Manufacturing overheads Total 5 6 9 20 Manufacturing overheads are applied to production at the rate of 18 a direct labour hour. This overheads rate is made up of the following components: Variable factory overhead Fixed factory overhead - Direct Allocated Applied manufacturing overhead rate 6 8 4 18 In determining selling prices Galbraith adds a 40 per cent mark-up to the product cost. This provides a suggested selling price of 28 for the motor. The marketing department, however has set the current selling price at 27 to maintain market share. The order would, however require additional fixed factory overheads of 15,000 a month in the form of supervision and clerical costs. If management accepts the order, Page o zhotbrs Sill be maQactuted and delivered to Holborn each month for the next four months