XYZ Inc., is preparing a bid to produce industrial equipment. The company has experienced the...
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Accounting
XYZ Inc., is preparing a bid to produce industrial equipment. The company has experienced the following costs:
Cumulative
Total Cumulative Costs
Units Produced
Materials
Labor
10
$60,000
$120,000
20
120,000
216,000
40
240,000
388,800
At XYZ, variable overhead is applied on the basis of $1.00 per direct labor dollar. Based on historical costs, XYZ knows that the production of 40 units will incur $100,000 of fixed overhead costs. The bid request is for an additional 40 units; all companies submitting bids are allowed to charge a maximum of 25% above full cost for each order.
The maximum bid price that XYZ could submit for the 40 units is
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