The TOIOWrng Ihornation appies to the questions displayed beioW. Manhattan Pharm

Question

The TOIOWrng Ihornation appies to the questions displayed beioW. Manhattan Pharmaceuticals, Inc., specializes in packaging bulk drugs in standard dosages for local hospitals. Wyant Memorial Hospital has asked Manhattan Pharmaceuticals to bid on the packaging of one million doses of medication at total cost plus a return on total cost of no more than 30 percent. Wyant defines total cost as including all variable costs of performing the service, a reasonable amount of fixed overhead, and reasonable administrative costs. The hospital will supply all packaging materials and ingredients. Wyant's administrator has indicated that any bid over $0.05 per dose will be rejected The controller for Manhattan Pharmaceuticals has accumulated the following data prior to the preparation of the bid $34.00,per direct-labor $30.00 per DLH $38.00 per DLH $3,800 for the order Direct labor hour (DLH) Variable overhead Fixed overhead Incremental administrative costs Production rate 2,500 doses per DLH Problem 15-40 Part 1 Required: 1. Calculate the minimum price per dose that Manhattan Pharmaceuticals could bid for the Wyant Memorial Hospital job that would not reduce the pharmaceutical company's income. (Round your answer to 4 decimal places.) Minimum price er dose 0.029

Explanation / Answer

The fixed overhead is a sunk cost which should not be included for accepting any special order Total DLH required = 1,000,000 doses/2,500 doses per DLH = 400 DLH Computation of Bid Price Per Dose Particular Amount Direct labor ( $34 * 400 )= $13,500 $13,600 Variable overhead( $30 * 400) $12,000 incremental administrative cost $3,800 Total cost $29,400 bid price (120% * total cost)   $35,280 bid price per dose ($35280/1000000) $0.0353

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