Denver Boot Corporation has been asked to submit a bid on supplying 1,000 pairs of military combat boots to the Armed Forces Training Center.The company's costs per pair of boots are as follows:
Direct inaterial $8
Directlabor 6
Variable overhead 3
V ariable selling cost (commission) 3
Fixed overhead (allocated) 2
Fixed selling and administrative cost 1
Assuming that there would be no commission on this potential sale,the lowest price the firm can bid is some price greater than
A)$23.
B)$20.
C)$17.
D)$14.

Question

Denver Boot Corporation has been asked to submit a bid on supplying 1,000 pairs of military combat boots to the Armed Forces Training Center.The company's costs per pair of boots are as follows:
Direct inaterial                                                       $8
Directlabor                                                              6
Variable overhead                                                    3
V ariable selling cost (commission)                        3
Fixed overhead (allocated)                                      2
Fixed selling and administrative cost                      1
Assuming that there would be no commission on this potential sale,the lowest price the firm can bid is some price greater than
A)$23.
B)$20.
C)$17.
D)$14.

Quizplus · Accepted Answer

The lowest price the firm can bid is the sum of direct material, direct labor, and variable overhead costs, which totals $17. The fixed costs and variable selling costs are not relevant for this decision as they do not change with the order.

Denver Boot Corporation Has Been Asked to Submit a Bid