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 82% of productive capacity during July. The total manufacturing costs for July for the production of 29,520 batteries are budgeted as follows:

The company has an opportunity to submit a bid for 3,000 batteries to be delivered by July 31 to a government agency. If the contract is obtained, it is anticipated that the additional activity will not interfere with normal production during July 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 $425,600 Direct labor 156,500 Variable factory overhead 43,724 Fixed factory overhead 88,000 Total manufacturing costs $713,824

Explanation / Answer

Per unit Direct materials 14.42 =425600/29520 Direct labor 5.30 =156500/29520 Variable factory overhead 1.48 =43724/29520 Per unit cost 21.20

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