Power Serve Company expects to operate at 85% of productive capacity during May.

Question

Power Serve Company expects to operate at 85% of productive capacity during May. The total manufacturing costs for May for the production of 33,150 batteries are budgeted as follows: Direct materials $491,400 Direct labor 180,700 Variable factory overhead 50,570 Fixed factory overhead 101,000 Total manufacturing costs $823,670 The company has an opportunity to submit a bid for 2,000 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

Explanation / Answer

Total cost for 333150 Batteries=491,400+181700+50750+101000+823670=$1647340 Cost for 2000 Batteries=1647340*2000/33150=$9888.48 Minimum Price of contract should be=9888.48/0.85=$11634.68 Please rate

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