Reference no: EM133019372
Problem - Accepting Business at a Special Price - Power Serve Company expects to operate at 85% of productive capacity during May. The total manufacturing costs for May for the production of 28,900 batteries are budgeted as follows:
Direct materials $418,600
Direct labor 153,900
Variable factory overhead 43,070
Fixed factory overhead 86,000
Total manufacturing costs $701,570
The company has an opportunity to submit a bid for 2,000 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 Power Serve Company should not go in bidding on the government contract?