Question

Gibson Manufacturing Co. expects to make 31,500 chairs during the 2017 accounting period. The company made 4,600 chairs in January. Materials and labor costs for January were $16,700 and $24,500, respectively. Gibson produced 1,500 chairs in February. Material and labor costs for February were $9,800 and $12,600, respectively. The company paid the $346,500 annual rental fee on its manufacturing facility on January 1, year 1. The rental fee is allocated based on the total estimated number of units to be produced during the year. Required Assuming that Perez desires to sell its chairs for cost plus 25 percent of the cost, what price should be charged for the chairs produced in January and February? (Round intermediate calculations and final answers to 2 decimal places.)

Answer 1

The price for the chairs produced in January and February should be $10.30 and $17.84, respectively.

Step-by-step explanation:

To determine the price of the chairs produced in January and February, we need to calculate the total cost per chair and add a markup of 25%. First, calculate the total cost per chair for each month by dividing the sum of materials and labor costs by the number of chairs produced. In January, the total cost per chair is ($16,700 + $24,500) / 4,600 = $8.24. In February, the total cost per chair is ($9,800 + $12,600) / 1,500 = $14.27. Next, add a markup of 25% to each total cost per chair. In January, the price should be $8.24 + ($8.24 * 25%) = $10.30. In February, the price should be $14.27 + ($14.27 * 25%) = $17.84. Therefore, the price for the chairs produced in January and February should be $10.30 and $17.84, respectively.

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