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Home x Connect x View hewconnect mheducation.com/flow/connect html Problem 15-40 Cost-Plus Pricing: Bidding (LO 15-3 15-10) The following information applies to the questions displayed below) Manhattan Pharmaceuticals, Inc. specializes in packaging bulk drugs in standard dosages for local hospitals. Wyant Memorial Hospital has asked Manhattarn Pharmaceuticals to bid on the packaging of three million doses of medication at total cost plus a return on total cost of no more than 30 percent Wyant defines total cost as including all variable costs of overhead, and reasonable administrative costs. The hospital will supply all packaging materials and ingredients. Wyant's administrator has indicated that any bid over $004 per dose will be rejected. The controller for Manhattan Pharmaceuticals has accumulated the following data prior to the preparation of the bid. performing the service, a reasonable amount of fixed Direct labor $2900 per direct-labor hour (DLH) Variable overhead Fixed overhead Incr $25.00 per DLH $3300 per DLH costs $3, Production rate 5,000 doses per DLH Problem 15-40 Part 1

Explanation / Answer

Direct Labor required to complete the order = 30,00,000 Doses / 5000 Doses per Hour Direct Labor required to complete the order =600 DLH Computation of Minimum Price per Bid per Dose Particular Amount in $ Direct Labor - $29 X 600 DLH 17400 Variable Overhead - $25 X 600 DLH 15000 Incremental Administrative Cost 3300 Total Cost of Order 35700 No. of Doses 3000000 Minimum Price per Dose 0.0119

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