Excess machine hours 20,000. Received offers from two companies to buy 210,000 units of F at 0.60 and 300,000 units of D at 0.70.
Estimated costs for the two products are; F (shs) D (shs)
Materials 0.25 0.35
Direct labour 0.10 0.12
Factory overhead 0.20 0.28
Factory overhead is applied on a machine hour basis of 5.60 per hour. 75% of factory overhead is fixed. Which order should the company accept?