Question: Accepting Business at a Special Price
Power Serve Company expects to operate at 85% of productive capacity during April. The total manufacturing costs for April for the production of 37,400 batteries are budgeted as follows:
| Direct materials |
$279,800 |
| Direct labor |
102,900 |
| Variable factory overhead |
28,700 |
| Fixed factory overhead |
100,980 |
| Total manufacturing costs |
$512,380 |
The company has an opportunity to submit a bid for 3,000 batteries to be delivered by April 30 to a government agency. If the contract is obtained, it is anticipated that the additional activity will not interfere with normal production during April or increase the selling or administrative expenses.
a. What is the April budgeted cost per battery for the production of 37,400 batteries? $ _________________ per battery
b. What is the unit cost below which Power Serve Company should not go in bidding on the government contract? $ _________________ per unit