Palomar Battery Company expects to operate at 75% of productive capacity during April. The total manufacturing costs for April for the production of 60,000 batteries are budgeted as follows:
Direct materials ............. $ 75,000
Direct labor .............. 960,000
Variable factory overhead ......... 111,000
Fixed factory overhead .......... 288,000
Total manufacturing costs ........ $1,434,000
The company has an opportunity to submit a bid for 17,500 batteries to be delivered by April 30 to a government agency. If the contract is obtained, it is anticipated that the additional activity will not interfere with normal production during April or increase the selling or administrative expenses.
a. What is the April budgeted cost per battery for the production of 60,000 batteries?’
b. What is the unit cost below which Palomar Battery Company should not go in bidding on the government contract?