(Appendix 2) Dan’s Manufacturing is trying to decide how much to offer as a bid (selling) price for the manufacture of 1,400 mechanical log splitters that are needed by a large retail sports chain. Because Dan has never made a log splitter before, he wants to first estimate a standard cost for the product. He has already estimated direct material to be $25 per unit. His cost accountant has suggested that an 85 percent learning curve be used and that the standard cost for labor be based on estimated time for 128 log splitters on the learning curve. Dan will be paying production workers $14 per direct labor hour. Assume that variable overhead has previously been estimated at $8 per direct labor hour. The first log splitter took 3 hours to build.

992 PART VII Performance Evaluation

a. Calculate the amount of time on the 85 percent learning curve required to build 128 log splitters.

b. What is the standard direct labor cost per log splitter?

c. What is the total standard variable production cost per log splitter?

d. Suppose Dan wants to make 40 percent above standard variable unit pro¬ duction cost on the manufacture of the log splitter. How much should he bid to deliver the 1,400 log splitters?