Power Pack Company expects to operate at 80% of productive capacity during July. The total manufacturing costs for July for the production of 45,000 batteries are budgeted as follows: Direct materials $375,000 Direct labor 160,750 Variable factory overhead 71,750 Fixed factory overhead 261,250 Total manufacturing costs $868,750 The company has an opportunity to submit a bid for 4,500 batteries to be delivered by July 31 to a government agency. If the contract is obtained, it is anticipated that the additional activity will not interfere with normal production during July or increase the selling or administrative expenses. What is the unit cost below which Power Pack Company should not go in bidding on the government contract? Round your answer to two decimal places.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Power Pack Company expects to operate at 80% of productive capacity during July. The total
| Direct materials | $375,000 |
| Direct labor | 160,750 |
| Variable factory |
71,750 |
| Fixed factory overhead | 261,250 |
| Total manufacturing costs | $868,750 |
The company has an opportunity to submit a bid for 4,500 batteries to be delivered by July 31 to a government agency. If the contract is obtained, it is anticipated that the additional activity will not interfere with normal production during July or increase the selling or administrative expenses.
What is the unit cost below which Power Pack Company should not go in bidding on the government contract? Round your answer to two decimal places.
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