[The Following Information Applies to the Questions Displayed Below

question 68

Multiple Choice

[The following information applies to the questions displayed below.]
John Boyd Corporation manufactures and sells 1,000 tractors each month.The primary component in each tractor is the motor.John Boyd has the monthly capacity to produce 1,300 motors.The variable costs associated with manufacturing each motor are shown below:
Fixed manufacturing overhead per month (for up to 1,300 units of production) averages $27,000.Joan Reid,Inc.has offered to purchase 200 motors from John Boyd per month to be used in its own outboard motors.
-If Joan Reid's order is rejected,what will be John Boyd 's average unit cost of manufacturing each motor?

• A)$68 per unit
• B)$70 per unit
• C)$96 per unit
• D)Some other amount

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Definitions:

Fixed Costs

Expenses that do not change in proportion to the level of goods or services produced within a certain scale, such as rent or salaries.

Demand Schedule

A table or graph that shows the quantity of a good or service that consumers are willing and able to purchase at various prices.

Variable Conversion Cost

Costs that vary with the level of production and are associated with converting raw materials into finished goods, excluding fixed costs.

Direct Material

Raw materials that can be directly traced to the production of a specific product and are a part of its finished composition.