Question

Accepting Business at a Special Price Palomar Battery Company expects to operate at 88% of full capacity during April. The total manufacturing costs for April for the production of 35,200 batteries are budgeted as follows: Direct materials $435,600 Direct labor 160,200 Variable factory overhead 44,840 Fixed factory overhead 91,520 Total manufacturing costs $732,160 The company has an opportunity to submit a bid for 2,000 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. Round your answers to the nearest cent. a. What is the April budgeted cost per battery for the production of 35,200 batteries? per battery b.What is the unit cost below which Palomar Battery Company should not go in bidding on the government contract? per unit

Answer 1

a
Total manufacturing cost	732160
Divide by Batteries	35200
April budgeted cost per battery	20.80	per battery
b
Direct materials	12.38	=435600/35200
Direct labor	4.55	=160200/35200
Variable factory overhead	1.27	=44840/35200
Minimum Unit cost	18.20	per unit