Bids have been called for the construction of a turbine generator for the Milford Power Station. Your company accountant has examined the specifications and has established the following costs associated with the contract:

You are aware of three other companies that are likely to bid on this project. Relevant details are as follows:

Your current capacity utilization is moderate, leaving sufficient capacity to handle this project. Your previous bidding practice has been to add 25 percent to full costs.

(a) What is the absolute minimum price you would bid on this contract?

(b) What is your actual bid price, on the basis of the information given?

(c) What other factors would you wish to consider or investigate before making your bid?

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Bid preparation costs Direct materials Direct labor Specialized equipment required* Variable overhead Allocated overhead $ 750 115,000 252,500 27,500 42,000 86,750