Question

Power Systems Inc. manufactures jet engines for the United States armed forces on a cost-plus basis.The production cost of a particular jet engine is shown below:* Direct materials = $200,000* Direct labor = 150,000* Manufacturing overhead:* Supervisor's salary = 20,000* Fringe benefits on direct labor = 15,000* Depreciation = 12,000* Rent = 11,000* Total cost = $408,000If production of this engine was discontinued, the production capacity would be idle, and the supervisor would be laid off.The depreciation referred to above is for special equipment that would have no resale value and that does not wear out through use.When asked to bid on the next contract for this engine, the minimum unit price that Power Systems should bid is:1) $408,000.2) $365,000.3) $397,000.4) $385,000.

Answer 1

Answer:

4) $385,000.

Explanation:

The computation of the minimum unit price is shown below:

= Direct materials + Direct labor + Supervisor salary + Fringe benefits on direct labor

= $200,000 + $150,000 + $20,000 + $15,000

= $385,000

Simply we added the direct material, direct labor, supervisor salary and the fringe benefits so that the accurate amount can come.

All other information which is given is not relevant. Hence, ignored it