Question - 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 35,700 batteries are budgeted as follows:
Direct materials $386,000 Direct labor 141,900 Variable factory overhead 39,730 Fixed factory overhead 79,000 Total manufacturing costs $646,630 The company has an opportunity to submit a bid for 3,000 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.
What is the unit cost below which Power Serve Company should not go in bidding on the government contract? Round your answer to two decimal places.