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Required information Problem 16-30 (Algo) Relevant costs, special sales order-idle versus full capacity LO 2, 3 [The following information applies to the questions displayed below.] Petro Motors Inc. (PMI) produces small gasoline-powered motors for use in lawn mowers. The company has been growing steadily over the past five years and is operating at full capacity. PMI recently completed the addition of new plant and equipment at a cost of $10,000,000, thereby increasing its manufacturing capacity to 122,000 motors annually. The addition to plant and equipment will be depreciated on a straight-line basis over 10 years. Sales of motors were 71,000 units prior to the completion of the additional capacity. Cost records indicated that manufacturing costs had totaled $71 per motor, of which $59 per motor was considered to be variable manufacturing costs. PMI has used the volume of activity at full capacity as the basis for applying fixed manufacturing overhead. The normal selling price is $102 per motor, and PMI pays a 5% commission on the sale of its motors. LawnPro.com offered to purchase 46,000 motors at a price of $71 per unit to test the viability of distributing lawn mower replacement motors through its website. PMI would be expected to produce the motors, store them in its warehouse, and ship individual motors to LawnPro.com customers. As orders are placed directly through the LawnPro.com website, they would be forwarded instantly to PMI. No commissions will be paid on this special sales order, and freight charges will be paid by the customer purchasing a motor. Problem 16-30 (Algo) Part a Required: a. Calculate the cost per motor, for cost accounting purposes, after completion of the additional plant capacity. Cost per motor

Required information Problem 16-30 (Algo) Relevant costs, special sales order-idle versus full capacity LO 2, 3 [The following information applies to the questions displayed below.] Petro Motors Inc. (PMI) produces small gasoline-powered motors for use in lawn mowers. The company has been growing steadily over the past five years and is operating at full capacity. PMI recently completed the addition of new plant and equipment at a cost of $10,000,000, thereby increasing its manufacturing capacity to 122,000 motors annually. The addition to plant and equipment will be depreciated on a straight-line basis over 10 years. Sales of motors were 71,000 units prior to the completion of the additional capacity. Cost records indicated that manufacturing costs had totaled $71 per motor, of which $59 per motor was considered to be variable manufacturing costs. PMI has used the volume of activity at full capacity as the basis for applying fixed manufacturing overhead. The normal selling price is $102 per motor, and PMI pays a 5% commission on the sale of its motors. LawnPro.com offered to purchase 46,000 motors at a price of $71 per unit to test the viability of distributing lawn mower replacement motors through its website. PMI would be expected to produce the motors, store them in its warehouse, and ship individual motors to LawnPro.com customers. As orders are placed directly through the LawnPro.com website, they would be forwarded instantly to PMI. No commissions will be paid on this special sales order, and freight charges will be paid by the customer purchasing a motor. Problem 16-30 (Algo) Part a Required: a. Calculate the cost per motor, for cost accounting purposes, after completion of the additional plant capacity. Cost per motor

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 1PB: Classify costs Cromwell Furniture Company manufactures sofas for distribution to several major...
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Required information Problem 16-30 (Algo) Relevant costs, special sales order-idle versus full capacity LO 2, 3 [The following information applies to the questions displayed below.] Petro Motors Inc. (PMI) produces small gasoline-powered motors for use in lawn mowers. The company has been growing steadily over the past five years and is operating at full capacity. PMI recently completed the addition of new plant and equipment at a cost of $10,000,000, thereby increasing its manufacturing capacity to 122,000 motors annually. The addition to plant and equipment will be depreciated on a straight-line basis over 10 years. Sales of motors were 71,000 units prior to the completion of the additional capacity. Cost records indicated that manufacturing costs had totaled $71 per motor, of which $59 per motor was considered to be variable manufacturing costs. PMI has used the volume of activity at full capacity as the basis for applying fixed manufacturing overhead. The normal selling price is $102 per motor, and PMI pays a 5% commission on the sale of its motors. LawnPro.com offered to purchase 46,000 motors at a price of $71 per unit to test the viability of distributing lawn mower replacement motors through its website. PMI would be expected to produce the motors, store them in its warehouse, and ship individual motors to LawnPro.com customers. As orders are placed directly through the LawnPro.com website, they would be forwarded instantly to PMI. No commissions will be paid on this special sales order, and freight charges will be paid by the customer purchasing a motor. Problem 16-30 (Algo) Part a Required: a. Calculate the cost per motor, for cost accounting purposes, after completion of the additional plant capacity. Cost per motor
Transcribed Image Text:Required information Problem 16-30 (Algo) Relevant costs, special sales order-idle versus full capacity LO 2, 3 [The following information applies to the questions displayed below.] Petro Motors Inc. (PMI) produces small gasoline-powered motors for use in lawn mowers. The company has been growing steadily over the past five years and is operating at full capacity. PMI recently completed the addition of new plant and equipment at a cost of $10,000,000, thereby increasing its manufacturing capacity to 122,000 motors annually. The addition to plant and equipment will be depreciated on a straight-line basis over 10 years. Sales of motors were 71,000 units prior to the completion of the additional capacity. Cost records indicated that manufacturing costs had totaled $71 per motor, of which $59 per motor was considered to be variable manufacturing costs. PMI has used the volume of activity at full capacity as the basis for applying fixed manufacturing overhead. The normal selling price is $102 per motor, and PMI pays a 5% commission on the sale of its motors. LawnPro.com offered to purchase 46,000 motors at a price of $71 per unit to test the viability of distributing lawn mower replacement motors through its website. PMI would be expected to produce the motors, store them in its warehouse, and ship individual motors to LawnPro.com customers. As orders are placed directly through the LawnPro.com website, they would be forwarded instantly to PMI. No commissions will be paid on this special sales order, and freight charges will be paid by the customer purchasing a motor. Problem 16-30 (Algo) Part a Required: a. Calculate the cost per motor, for cost accounting purposes, after completion of the additional plant capacity. Cost per motor
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