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XYZ Company produces lawn furniture. The cost per lawn chair is computed as follows:

Direct Labor $2.25
Materials $2.30
Plant overhead $1.15
Administrative and selling expense    $0.80
Total $6.50 per unit

These costs are allocated to each unit of output bases on projected annual production of 500,000 chairs.

Company added $0.65 mark-up to price to arrive at selling price of $7.15 per unit

Company XY needs to purchase 30,000 chairs at $5.50 each.

1) Compute the marginal cost per chair to XYZ of accepting the chair order from XY?

2) prepare down the assumptions that were made in computing the marginal cost?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M910108

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