Accepting Business at a Special Price Forever Ready Company expects to operate a

Question

Accepting Business at a Special Price

Forever Ready Company expects to operate at 88% of productive capacity during May. The total manufacturing costs for May for the production of 29,040 batteries are budgeted as follows:

The company has an opportunity to submit a bid for 2,000 batteries to be delivered by May 31 to a government agency. If the contract is obtained, it is anticipated that the additional activity will not interfere with normal production during May or increase the selling or administrative expenses.

What is the unit cost below which Forever Ready Company should not go in bidding on the government contract? Round your answer to two decimal places.
$ per unit

Direct materials $225,100 Direct labor 82,800 Variable factory overhead 23,156 Fixed factory overhead 46,000 Total manufacturing costs $377,056

Explanation / Answer

Direct material per unit=225100/29040=7.75
Direct labour per unit=82800.29040=2.85
Variable overhead=23156/29040=.79
Fixed over head=46000/29040=1.58

total=$12.984

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