Bob Johnson, Inc., sells a lounging chair for $24 per unit. It incurs the follow
ID: 2504813 • Letter: B
Question
Bob Johnson, Inc., sells a lounging chair for $24 per unit. It incurs the following costs for the product: direct materials, $11; direct labor, $8; variable overhead, $3; and fixed overhead, $2.
The company has received a special order for 52 chairs. The order would require rental of a special tool for $290. Bob Johnson, Inc., has sufficient idle capacity to produce the chairs for this order.
Required:
Calculate the minimum price per chair that the company could charge for this special order if management requires a $570 minimum profit on any special order. Do not round your intermediate calculations. If required, round your answer to two decimal places.
$
Explanation / Answer
Let the price per chair be $ x
Selling price = x* 52
Cost price = 52 * (11 + 8 + 3 + 2) + 290 = $ 1538
Profit = S.P - C.P
52x - 1538 >= 570
x > = $ 40.54
Price of each chairshould be at least $40.54