Baird Manufacturing Co. expects to make 31,700 chairs during the 2017 accounting

Question

Baird Manufacturing Co. expects to make 31,700 chairs during the 2017 accounting period. The company made 3,600 chairs in January. Materials and labor costs for January were $17,100 and $24,100, respectively. Baird produced 1,300 chairs in February Material and labor costs for February were $8,600 and $12,300, respectively. The company paid the $665,700 annual rental fee on its manufacturing facility on January 1, 2017 Required Assuming that Baird desires to sell its chairs for cost plus 25 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.) January February Price

Explanation / Answer

Material and labor cost per unit for January

= Total Material and labor costs / Number of units in January

= ($17,100 + $24,100) / 3,600

= $11.44 per unit

Material and labor cost per unit for February

= Total Material and labor costs / Number of units in February

= ($8,600 + $12,300) / 1,300

= $16.08 per unit

Manufacturing overhead per unit

= Annual rental fee / Annual production

= $665,700 / 31,700

= $21 per unit

So, Price to be charged

= Total costs per unit x 1.25

= (Material and labor cost per unit + Overhead per unit) x 1.25

January

= ($11.44 + $21) x 1.25

= $40.55 per unit

February

= ($16.08 + $21) x 1.25

= $46.35 per unit

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