Allocated and Opportunity Cost

Allocated Cost and Opportunity Cost 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 foreign company that has in entered Binder’s market. The company is currently bidding on a potential order from Dacor appliances for 7,000 model 350 motors. The estimated cost of each motor is $55, as follows: direct materials $25 Direct labor 10 overhead $20 total $55 the predetermined overhead rate is two dollars per labor dollar this was estimated by dividing estimated annual overhead.

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