1.
portable power company expects to operate at 80% of productive capacity during july. the total
manufacturing costs for july for the production of 25,000 batteries are budgeted as follows:
direct material  162,500
direct labor   70,000
variable factory overhead  30,000
fixed factory overhead   112,500
total manufacturing costs   375,000
the company has an opportunity to submit a bid for 2,500 batteries t be delivered by july 31 to a
government agency. if the contract is obtained it is anticapated that the additional activity will
not interfere with normal production during july or increase the selling or administrative
expenses. what is the unit cost below which portable power company should not go in bidding on
the government cntract?
Solution
The per unit bid should not be less than $ 10.5 & the total amount of bid will not be less than $
26250/-
Particulars Total Per Unit Cost
Direct Material 162500/25000 6.5
Direct labour 70000/25000 2.8
Variable Factory Overheads 30000/25000 1.2
Total 10.5
Total Bid 2500*10.5 26250