Evaluate the marginal cost per chair to xy

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Reference no: EM1310723

Marginal costs calculations and the assumptions on capacity and requirement of fixed expenses.

Company XY manufactures lawn furniture. The cost per lawn chair is estimated 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 the projected annual production of 500,000 chairs.

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

Company ABC wants to purchase 30,000 chairs at $5.50 each.

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

2. What assumptions were made in calculating the marginal cost?

Reference no: EM1310723

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