Question

Cool Air​ Inc., manufactures single room sized air conditioners. The cost accounting system estimates manufacturing costs to be $ 240.00 per air​ conditioner, consisting of 60​% variable costs and 40​% fixed costs. The company has surplus capacity available. It is Cool Air​ Inc.'s policy to add a 20​% markup to full costs. A medium sized motel chain is currently expanding and has decided to create more rooms and air condition all of its​ rooms, which are currently not air conditioned. Cool Air Inc. is invited to submit a bid to the motel chain. What per unit price will Cool Air Inc. most likely bid for this special order of 200​ units? Assume that the price is being fixed for a longminusterm commitment.

Answer 1

Selling price= $172.8

Step-by-step explanation:

Giving the following information:

Manufacturing costs to be $ 240.00 per air​ conditioner

Consisting of 60​% variable costs and 40​% fixed costs.

Selling price= 20​% markup to full costs.

Because it is a special offer and there is unused capacity, we will not take into account the fixed costs:

Unitary cost= 240*0.6= $144

Selling price= 144*1.2= $172.8