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Question

Saved You received no credit for this question in the previous attemp Required information Problem 15-41 Pricing a Special Order; International (LO 15-10) The following information applies to the questions displayed below Wolverine Valve and Fitting Company, located in southern Michigan, manufactures a variety of industrial valves and pipe fittings. Currently, the company is operating at about 70 percent capacity. Management has been approached by Glasgow Industries Ltd. of Scotland with an offer to buy 150,000 units of a pressure valve. Glasgow Industries manufactures a valve that is almost identical to Wolverine's pressure valve; however, a fire in Glasgow Industries' valve plant has shut down its manufacturing operations. Glasgow needs the 150,000 valves over the next four months to meet commitments to its regular customers. Glasgow is prepared to pay $3770 each for the valves. Wolverine's total product cost for the pressure valve is $39.00, calculated as follows: Direct material Direct labor Manufacturing $ 10.50 12.00 16.50 overhead Total nroduct cost 3900 earch up

Explanation / Answer

Answer 3. Direct labor Hour required per Unit = $16.50 (MOH per unit) / $33 (MOH rate per DLH) Direct labor Hour required per Unit = 0.50 DLH per Unit Calculation of Minimum Price Per Unit Variable Cost per Unit Direct Material             10.50 Direct Labor             12.00 Varible MOH - $9 X 0.50 DLH               4.50              27.00 Additional Fixed Cost - Supervision & Clerical Cost - $22,500 / 37,500 Units                0.60 Minimum Price Per Unit              27.60

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