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Problem on accepting business at a special price

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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

Reference no: EM131752223

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