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Question - Forever Ready Company expects to operate at 82% of productive capacity during May. The total manufacturing costs for May for the production of 36,900 batteries are budgeted as follows:
Direct materials $286,000
Direct labor 105,200
Variable factory overhead 29,460
Fixed factory overhead 59,000
Total manufacturing costs $479,660
The company has an opportunity to submit a bid for 3,000 batteries to be delivered by May 31 to a government agency. If the contract is obtained, it is anticipated that the additional activity will not interfere with normal production during May or increase the selling or administrative expenses.
Required - What is the unit cost below which Forever Ready Company should not go in bidding on the government contract?
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