Total Motors Produced = 35,000
Cost/Motor of Regal, Inc.: 16.3
Direct materials | 4.50 |
Direct labor | 4.60 |
Variable factory overhead | 3.75 |
Fixed factory overhead | 3.45 |
Total Cost of production of Regal, Inc. = 570,500
Cost/Motor of Outsider 15.0
Total Cost of production of Outsider = 525,000
Extra cost born by Regal, Inc. = 45,700
Extra cost per motor = 1.3
(Just a rough calculation; I am not sure about its authenticity)
Regads,
Nadeempomy
From: vuaskari_com@googlegroups.com [mailto:vuaskari_com@googlegroups.com] On Behalf Of anjum riaz
Sent: Tuesday, February 26, 2013 11:11 AM
To: attock-vu-group; VU Pakistan; vuaskari_com@googlegroups.com; vustudymania@googlegroups.com
Subject: ::: vuaskari.com ::: MGT 402 is question ki samj ni aa rai some one help
The Regal, Inc. makes 35,000 motors to be used in the production of its sewing machines. The cost per motor at this level of activity would be:
Particular | Rs. |
Direct materials | 4.50 |
Direct labor | 4.60 |
Variable factory overhead | 3.75 |
Fixed factory overhead | 3.45 |
An outside supplier recently began producing a comparable motor for the sewing machine. The price to Regal for this motor is Rs. 15. If Regal decided not to make the motors, there would be no other use for the production facilities. Required: If Regal decides to continue making the motor, how much higher or lower would net income be than if the motors are purchased from the outside supplier?
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