Accepting Business at a Special Price Power Serve Company expects to operate at
ID: 2470019 • Letter: A
Question
Accepting Business at a Special Price
Power Serve Company expects to operate at 90% of productive capacity during May. The total manufacturing costs for May for the production of 30,600 batteries are budgeted as follows:
The company has an opportunity to submit a bid for 1,000 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 Power Serve Company should not go in bidding on the government contract? Round your answer to two decimal places.
$_________per unit
Direct materials $474,400 Direct labor 174,400 Variable factory overhead 48,880 Fixed factory overhead 98,000 Total manufacturing costs $795,680Explanation / Answer
Unit cost below which Power Serve Company should not go in bidding on the government contract is $22.80
30,600 batteries Direct materials 474400 15.50 Direct labor 1,74,400 5.70 Variable factory overhead 48,880 1.60 Fixed factory overhead 98,000 Total manufacturing costs 7,95,680 22.80