Purchase cost Variable manufacturing Fixed manufacturing Variable marketing Fixed marketing Cost of option Difference in favour of make option

1-a. The Provincial Bus Company wishes to purchase 660 engines in October. The bus company is willing to pay a fixed fee of $600,000 and reimburse The Engine Guys for all manufacturing costs incurred to manufacture 660 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.

1-b. Indicate whether the Provincial Bus Company’s contract should be accepted.

2-a. An outside contractor is willing to supply 2,500 engines at a price of $432 per unit. If the offer is accepted, the company will make 2,500 engines in-house and buy 2,500 engines from the contractor. The company’s fixed manufacturing costs will decline by 20% and the variable marketing costs per unit on the 2,500 engines purchased will decline by 40%. Calculate the cost in each option. (Do not round intermediate calculations. Leave no cells blank – be certain to enter “0” wherever required.)

2-b. Determine whether the contractor’s offer should be accepted?

  • Attachment 1
  • Attachment 2

Purchase cost Variable manufacturing Fixed manufacturing Variable marketing Fixed marketingCost of option Difference in favour of make option

Order the answer to view it

Place this order or similar order and get an amazing discount. USE Discount code “GET20” for 20% discount

 

Posted in Uncategorized