Chapter 11, Problem 14E

Accepting business at a special price

Box Elder Power Company expects to operate at 85% of productive capacity during May. The total manufacturing costs for May for the production of 40,000 batteries are budgeted as follows:

The company has an opportunity to submit a bid for 5,000 batteries to be delivered by May 31 to a government agency. If the contract is obtained, it is anticipated that the additional activity will not interfere with normal production during May or increase the selling or administrative expenses. What is the unit cost below which Box Elder Power Company should not go in bidding on the government contract?