Quick Connect manufactures highminus?tech cell phones. Quick Connect has a polic

Question

Quick Connect manufactures

highminus?tech

cell phones. Quick Connect has a policy of adding a

1010?%

markup to full costs and currently has excess capacity. The following information pertains to the? company's normal operations per? month:

Output units

1 comma 6001,600

phones

Machineminus?hours

700700

hours

laborminus?hours

1 comma 4001,400

hours

Direct materials per unit

$ 21$21

Direct manufacturing labor per hour

$ 10$10

Variable manufacturing overhead costs

$ 228 comma 800$228,800

Fixed manufacturing overhead costs

$ 127 comma 300$127,300

Product and process design costs

$ 144 comma 000$144,000

Marketing and distribution costs

$ 154 comma 645$154,645

Quick Connect Products is approached by an overseas customer to fulfill a

oneminus?timeminus?only

special order for

140140

units. All cost relationships remain the same except for a

oneminus?time

setup charge of

$ 2 comma 030$2,030.

No additional? design, marketing, or distribution costs will be incurred. What is the minimum acceptable bid per unit on this

oneminus?timeminus?only

special? order?

A.

$ 29.75$29.75

B.

$ 187.25$187.25

C.

$ 188.50

Output units

1 comma 6001,600

phones

Machineminus?hours

700700

hours

Direct manufacturing

laborminus?hours

1 comma 4001,400

hours

Direct materials per unit

$ 21$21

Direct manufacturing labor per hour

$ 10$10

Variable manufacturing overhead costs

$ 228 comma 800$228,800

Fixed manufacturing overhead costs

$ 127 comma 300$127,300

Product and process design costs

$ 144 comma 000$144,000

Marketing and distribution costs

$ 154 comma 645$154,645

Explanation / Answer

Solution:

Direct labor hours per unit = 1400 / 1600 = 0.875 hours per unit

variable manufacturing overhead cost per unit = $228,800 / 1600 = $143 per unit

Computation of minimum acceptable bid per unit of special order - Quick Connect Particulars Amount Total cost for special order: Direct Material (140*$21) $2,940.00 Direct labor (140*0.875*$10) $1,225.00 Variable manufacturing overhead (140 * $143) $20,020.00 One time setup charge $2,030.00 Total cost to be incurred for special order $26,215.00 Number of units in special order 140 Minimum acceptable bid per unit $187.25

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