Missouri Boot Corporation has been asked to submit a bid on supplying 1,000 pair
ID: 2480330 • Letter: M
Question
Missouri Boot Corporation has been asked to submit a bid on supplying 1,000 pairs of military combat boots to the Armed Forces Training Center. The company's cost per pair of boots are as follows: Direct Materials $8, Direct Labor $6; Variable Overhead $3, Variable selling $3, Fixed overhead (allocated) $2 and Fixed Selling and Administrative $1. Assuming that there would be no commission on this potential sale, the lowest price the firm can bid is some price greater than a) $23; b)$20; c)$17 or d)$14
Explanation / Answer
Answer is c)$17
fixed cost is not takens as it is a sunk cost or cost already incured not relavent
selling expense is not taken as the question says no commisson for this sale
Direct Materials 8 Direct Labor 6 Variable Overhead 3 the lowest price the firm can bid 17