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Q1) Company XY manufactures lawn furniture. Cost per lawn chair is evaluated 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 assigned to each unit of output bases on projected annual production of 500,000 chairs.

Company added $0.65 markup to price to arrive at selling price of $7.15 per unit

Company ABC wishes to buy 30,000 chairs at $5.50 each.

1. What is the marginal cost per chair to XY of accepting chair order from ABC?

2. What suppositions were made in computing marginal cost?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M917846

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