Transformation Motor Company produces a part that is used in the manufacture of one of its products.The unit manufacturing costs of this part,assuming a production level of 6,000 units,are as follows:
$\begin{array}{lr}
\text { Direct materials}&\$5\
\text {Direct labor (variable cost) }&6\
\text {Variable manufacturing overhead }&3\
\text {Fixed manufacturing overhead }&4\
\text {Total cost }&\$18\
\end{array}$
Alba Motors Company has offered to sell 6,000 units of the same part to Transformation for $17.50 per unit.Assuming the company has no other use for its facilities and that the fixed manufacturing costs are unavoidable,what should Transformation do?

Question

Transformation Motor Company produces a part that is used in the manufacture of one of its products.The unit manufacturing costs of this part,assuming a production level of 6,000 units,are as follows:
 $\begin{array}{lr}
\text { Direct materials}&\$5\
\text {Direct labor (variable cost) }&6\
\text {Variable manufacturing overhead }&3\
\text {Fixed manufacturing overhead }&4\
\text {Total cost }&\$18\
\end{array}$
 Alba Motors Company has offered to sell 6,000 units of the same part to Transformation for $17.50 per unit.Assuming the company has no other use for its facilities and that the fixed manufacturing costs are unavoidable,what should Transformation do?

Quizplus · Accepted Answer

The Answer of Transformation Motor Company produces a part that is used in the manufacture of one of its products.The unit manufacturing costs of this part,assuming a production level of 6,000 units,are as follows:
 $\begin{array}{lr}
\text { Direct materials}&\$5\
\text {Direct labor (variable cost) }&6\
\text {Variable manufacturing overhead }&3\
\text {Fixed manufacturing overhead }&4\
\text {Total cost }&\$18\
\end{array}$
 Alba Motors Company has offered to sell 6,000 units of the same part to Transformation for $17.50 per unit.Assuming the company has no other use for its facilities and that the fixed manufacturing costs are unavoidable,what should Transformation do?

Transformation Motor Company Produces a Part That Is Used in the Manufacture