Forever Ready Company expects to operate at 90% of productive capacity during Ma
ID: 2453466 • Letter: F
Question
Forever Ready Company expects to operate at 90% of productive capacity during May. The total manufacturing costs for May for the production of 36,900 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.
Direct materials $479,300 Direct labor 176,200 Variable factory overhead 49,290 Fixed factory overhead 99,000 Total manufacturing costs $803,790Explanation / Answer
Forever Ready company Units of production budgeted in May 36,900 click Total Cost $ Cost/Unit Direct materials 479,300 12.99 Direct labor 176,200 4.78 Variable factory overhead 49,290 1.34 Fixed factory overhead 99,000 2.68 Total manufacturing costs 803,790 21.78 The compny is oparting at 90% level and have enough capacity to produce additional 2000 units without any increase in Fixed costs So fixed cost will remain at $99,000 for May even after additional 2000 units produced. Based on Current production data , the fixed cost per unit that the company should not consider for bidding is $ 2.68 per unit, If the revised costing made on 38,900 units for bidding, then the per unit fixed cost to be ommitted is $2.54 .