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Business, 27.06.2019 09:00 sr814952

Binder manufacturing produces small electric motors used by appliance manufacturers. in the past year, the company has experienced severe excess capacity due to competition from a foreign company that has entered binder’s market. the company is currently bidding on a potential order from dacon appliances for 6,000 model 350 motors. the estimated cost of each motor is $45, as follows: direct material $20 direct labor $5 overhead $15 total $40. the predetermined overhead rate is $3 per direct labor dollar. this estimated by dividing estimated annual overhead ($15,000,000) by estimated annual direct labor ($5,000,000). the $15,000,000 of overhead is composed of $6,000,000 of variable costs and $9,000,000 of fixed costs. a. with respect to overhead, what is the opportunity, what is the opportunity cost of producing a model 350 motor? b. suppose binder can win the dacon business by bidding a price of $37 per motor (but no higher price will result in winning bid. should binder bid $37? c. discuss how an allocation of overhead based on opportunity cost would facilitate an appropriate bidding decision.

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