Accepting business at a special price Power Serve Company expects to operate at
ID: 2386051 • Letter: A
Question
Accepting business at a special pricePower Serve Company expects to operate at 85% of productive capacity during April. The total manufacturing costs for April for the production of 30,000 batteries are budgeted as follows:
The company has an opportunity to submit a bid for 2,000 batteries to be delivered by April 30 to a government agency.
If the contract is obtained, it is anticipated that the additional activity will not interfere with normal production during April or increase the selling or administrative expenses. What is the unit cost below which Power Serve Company should not go in bidding on the government contract?
A) 12, 16, 19, 14, or 20.
Explanation / Answer
Power Serve Company expects to operate at 85% of productive capacity during April. The total manufacturing costs for April for the production of 30,000 batteries are budgeted as follows:
The company has an opportunity to submit a bid for 2,000 batteries to be delivered by April 30 to a government agency.
If the contract is obtained, it is anticipated that the additional activity will not interfere with normal production during April or increase the selling or administrative expenses. What is the unit cost below which Power Serve Company should not go in bidding on the government contract?
(30 000 * 0.85) / 2 000 = 12.75
A) 12, 16, 19, 14, or 20.