Exercise 4-11A How the allocation of fixed cost affects a pricing decision LO 4-

Question

Exercise 4-11A How the allocation of fixed cost affects a pricing decision LO 4-3 Baird Manufacturing Co. expects to make 31,800 chairs during the 2017 accounting period. The company made 4.200 chairs in January. Materials and labor costs for January were $16,800 and $24,200, respectively. Baird produced 1,900 chairs in February. Material and labor costs for February were $8,200 and $13,700, respectively. The company paid the $826,800 annual rental fee on its manufacturing facility on January 1, 2017 Required Assuming that Baird desires to sell its chairs for cost plus 30 percent of cost, what price should be charged for the chairs produced in January and February? (Round intermediate calculations and final answers to 2 decimal places.) Februa K Prev 7 of 10 ill Next >

Explanation / Answer

Ans. January February Price 46.49 48.79 *Calculation: Jan Feb Price = Cost per unit + 30% (35.76 + 30%) (37.53 + 30%) 46.49 48.79 *January: Total cost per unit = Total cost / Units 150200 / 4200 35.76 *Total cost = Variable cost + Fixed cost (16800 + 24200) + 109200   150200 Fixed cost per unit (rental fees) = Fixed cost / budgeted chairs 826800 / 31800 26 Fixed cost (jan.) =   26 * 4200 109200 *February: Total cost per unit = Total cost / Units 71300 / 1900 37.53 *Total cost = Variable cost + Fixed cost (8200 + 13700) + 49400   71300 Fixed cost per unit (rental fees) = Fixed cost / budgeted chairs 826800 / 31800 26 Fixed cost (feb.) =   26 * 1900 49400

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