Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

With regards to the below questions, I was wondering why you included the cost of direct materials in the opportunity cost calculation Problem 6-3 Binder

With regards to the below questions, I was wondering why you included the cost of direct materials in the opportunity cost calculation

Problem 6-3

Binder Manufacturing pro- duces small electric motors used by appliance manufacturers. In the past year, the company has experienced severe excess capacity due to competition from a foreign company that has entered Binder's market. The company is currently bidding on a potential order from Dacon Appliances for 6,000 Model 350 motors. The estimated cost of each motor is $45, as follows:

a.With respect to overhead, what is the opportunity cost of producing a Model 350 motor?

Direct Material= $25

Direct Labor= $5

Manufacturing Overhead (variable)= (6,000,000/ 5,000,000)= 1.2 x 5 (Direct Labor)=$6

Opportunity Cost= 25 + 5 + 6= $36

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Robert Libby, Patricia Libby, Daniel G Short, George Kanaan, Maureen Sterling

6th Canadian edition

73208140, 1259105695, 978-1259105692

More Books

Students also viewed these Accounting questions

Question

Values: What is important to me?

Answered: 1 week ago