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Forever Ready Company expects to operate at 85% of productive capacity during May. The total manufacturing costs for May for the production of 34,000 batteries are budgeted as follows:
Direct materials $330,600
Direct labor 121,600
Variable factory overhead 34,000
Fixed factory overhead 68,000
Total manufacturing costs $554,200
The company has an opportunity to submit a bid for 3,000 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.

Respuesta :

ayokenny2001

Answer:

$14.3

Explanation:

Calculation to determine the unit cost which Forever Ready Company should not go in bidding on the government contract.

Direct materials $9.72

($330,600/34,000)

Direct labor $3.58

($121,600/34,000)

Variable factory overhead $1

($34,000/34,000)

Total per unit cost $14.3

($9.72 + $3.58 + $1)

Therefore, the unit cost which Forever Ready Company should not go in bidding on the government contracts is $14.3

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