Accepting Business at a Special Price

Forever Ready Company expects to operate at 90% of productive capacity during July. The total manufacturing costs for July for the production of 33,300 batteries are budgeted as follows:

Direct materials$428,000

Direct labor157,300

Variable factory overhead44,070

Fixed factory overhead88,000

Total manufacturing costs$717,370

The company has an opportunity to submit a bid for 2,000 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 Forever Ready Company should not go in bidding on the government contract?

$ per unit