Cost-plus pricing. (CMA, adapted) Hall Company specializes in packaging bulk dmgs. Wyant Memorial Hospital has asked Hall to bid on the packaging of one million doses ofmedication at full cost plus a return on full cost of no more than 9% after income taxes. Wyant defines cost as including all variable costs ofperforming the service, a reasonable amount offixed overhead, and incremental administrative costs. The hospital will supply all packaging materials and ingredi¬

ents. Wyant has indicated that any bid over $0,084 per dose will be rejected.

Don Greenway, the director of cost accounting, has accumulated the following infor¬

mation prior to the preparation of the bid:

Variable direct manufacturing labour costs Variable overhead costs Fixed overhead costs Incremental administrative costs Production rate

$19.20 per direct manufacturing labour-hour

$7.20 per direct manufacturing labour-hour

$36.00 per direct manufacturing labour-hour

$6,000 for the order 1,000 doses per direct manufacturing labour-hour Hall Company is subject to an income tax rate of 40%.

Required 1. Calculate the minimum price per dose that Hall could bid for the Wyant job without changing Hall’s net income.
2. Calculate Hall’s bid price per dose using the full cost criterion and the maximum allowable return specified by Wyant.
3. Without considering"your answer to requirement 2, assume that the price per dose that Hall calculated using the cost-plus criterion specified by Wyant is greater than the maximum bid of $0,084 per dose allowed by Wyant. Discuss the factors that Hall should consider before deciding whether or not to submit a bid at the maximum price of $0,084 per dose.