Power Systems Inc. manufactures jet engines for the United States armed forces on a cost-plus basis....

 

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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: Production Costs: Component Direct materials Direct labor Manufacturing overhead Total In addition, the manufacturing overhead is broken down in the following table: Manufacturing overhead Component Supervisor's salary Fringe benefits on direct labor Depreciation Rent Cost $200,000 $150,000 $58,000 $408,000 Cost $20,000 $15,000 $12,000 $11,000 If 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. The rent has to be paid as per a lease agreement. Question When asked to bid on the next contract for this engine, the minimum unit price that Power Systems should bid is which one of the following? 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: Production Costs: Component Direct materials Direct labor Manufacturing overhead Total In addition, the manufacturing overhead is broken down in the following table: Manufacturing overhead Component Supervisor's salary Fringe benefits on direct labor Depreciation Rent Cost $200,000 $150,000 $58,000 $408,000 Cost $20,000 $15,000 $12,000 $11,000 If 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. The rent has to be paid as per a lease agreement. Question When asked to bid on the next contract for this engine, the minimum unit price that Power Systems should bid is which one of the following?

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