Question

please show work so i can understand the work

10. Grounded Coffee Products manufactures coffee tables. Grounded Coffee Products has a policy of adding a 10% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month: Output units Machine-hours Direct manufacturing labor-hours Direct materials per unit Direct manufacturing labor per hour Variable manufacturing overhead costs Fixed manufacturing overhead costs Product and process design costs Marketing and distribution costs 20,000 tables 6000 hours 14,000 hours $140 $20 $360,000 $1,500,000 $1,400,000 $1,000,000 Grounded Coffee Products is approached by an overseas customer to fulfill a one-time-only special order for 5000 units. All cost relationships remain the same except for a one-time setup charge of $60,000. No additional design, marketing, or distribution costs will be incurred. What is the minimum acceptable bid per unit on this one-time-only special order? (Round your final answer to the nearest cent.) AA

Answer 1

As the firm has excess capacity, the relevant cost for the special order is the variable cost and one time set up charge Direct Material (140*5000) Direct Manufacturing Labor (14000*20/20000) *5000 Variable Manufacturing Overhead Cost (360000/20000) *5000 One-time setup Charge Minimum acceptable bid (A) Number of units in special order (B) Minimum acceptable bid Per Unit (A/B) 700,000 70,000 90,000 60,000 920,000 5,000 184.00 Answer A) $184.00