36. The opportunity cost of making a component part in a factory with excess capacity for
which there is no alternative use is
a. the total manufacturing cost of the component.
b. the total variable cost of the component.
c. the fixed manufacturing cost of the component.
d. zero.
ITEMS 37 TO 40 ARE BASED ON THE FOLLOWING:
Schundel Hair Care Company produces shampoo with conditioner. This is the company’s
only product, which it sells under the name “Shamcon.”
The manufacturing cost data for Shamcon are as follows:
Quantity required Current market price
Materials: per 1,000-ml bottle per ml
Chem 1 4 ml P0.54
Chem 2 3 ml 0.36
Chem 3 2 ml 0.20
Direct labor: 2 hours per bottle @ P3 per hour
Factory overhead:
Variable overhead – P2.00 per direct labor hour
Fixed overhead – 4.00 per direct labor hour
Clever Company, owner and operator of a chain of hotels, asked Schundel Hair Care
Company to submit a bid for 500 boxes of Shamcon. Each box will contain 24 bottles. Per
Clever’s specifications, its order should be different in chemical composition from the regular
Shamcon. According to Schundel Company’s production manager, Clever’s specifications
can be met if an additional chemical, Chem 4 would be used. Schundel Company has
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