2C3R BASIC COMPUTER COMPANY (BCC) SELLS ITS MICROCOMPUTERS USING BID...
275.
CSO: 2C3b
LOS: 2C3r
Basic Computer Company (BCC) sells its microcomputers using bid pricing. It develops
its bids on a full cost basis. Full cost includes estimated material, labor, variable
overheads, fixed manufacturing overheads, and reasonable incremental computer
assembly administrative costs, plus a 10% return on full cost. BCC believes bids in
excess of $1,050 per computer are not likely to be considered.
BCC’s current cost structure, based on its normal production levels, is $500 for materials
per computer and $20 per labor hour. Assembly and testing of each computer requires 17
labor hours. BCC expects to incur variable manufacturing overhead of $2 per labor hour,
fixed manufacturing overhead of $3 per labor hour, and incremental administrative costs
of $8 per computer assembled.
BCC has received a request from a school board for 200 computers. Using the full-cost
criteria and desired level of return, which one of the following prices should be
recommended to BCC’s management for bidding purposes?
a.
$874.00.
b.
$882.00.
c.
$961.40.
d.
$1,026.30.