Reference no: EM132751803

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

Problem 1: 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 ___ ??

Problem 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

Problem 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___ ??

Problem 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