You have been asked to estimate the per unit selling price of a new line of clothing. Pertinent data are as follows:
Direct labor rate: ............................... $15.00 per hour
Production material: ........................... $375 per 100 items
Factory overhead: .............................. 125% of direct labor
Packing costs: .................................. 75% of direct labor
Desired profit: .................................. 20% of total manufacturing cost
Past experience has shown that an 80% learning curve applies to the labor required for producing these items. The time to complete the first item has been estimated to be 1.76 hours. Use the estimated time to complete the 50th item as your standard time for the purpose of estimating the unit selling price.