Imperial Devices (ID) has offered to supply the state government with one model of its security screening
Question:
Based on these data, company management expects to receive $522 (= $435 à 120 percent) per monitor for those sold on this contract. After completing 500 monitors, the company sent a bill (invoice) to the government for $261,000 (= 500 monitors à $522 per monitor).
The president of the company received a call from a state auditor, who stated that the per monitor cost should be:
Materials........................................................................................... $ 75
Labor................................................................................................ 150
Supplies and other costs that will vary with production................... 45
$270
Therefore, the price per monitor should be $324 (= $270 Ã 120 percent). The state government ignored marketing costs because the contract bypassed the usual selling channels.
Required
What price would you recommend? Why?
Step by Step Answer:
Fundamentals of Cost Accounting
ISBN: 978-1259565403
5th edition
Authors: William Lanen, Shannon Anderson, Michael Maher