Cost Concepts Relevant to Decision Making
An executive from a large merchandising firm has called your vice-president for production to get a price quote for an additional 100 units of a given product. The vice-president has asked you to prepare a cost estimate. The number of hours required to produce a unit is 5. The average labor rate is $12 per hour. The materials cost $14 per unit. Overhead for an additional 100 units is estimated at 50% of the direct labor cost. If the company wants to have a 30% profit margin, what should be the unit price to quote?