How fixed cost allocation affects a pricing decision
Mallett Manufacturing Co. expects to make 30,000 chairs during 2011. The company made 3,200 chairs in January. Materials and labor costs for January were $16,000 and $24,000, respectively. Mallett produced 2,500 chairs in February. Materials and labor costs for February were $8,000 and $12,000, respectively. The company paid the $240,000 annual rental fee on its manufacturing facility on January 1, 2011. Ignore other manufacturing overhead costs.
Required
Assuming that Mallett desires to sell its chairs for cost plus 40 percent of cost, what price should be charged for the chairs produced in January and February?
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