Greenland Sports, Inc. has been asked to submit a bid to the National Hockey League on supplying 1,000 pairs of professional quality skates. The cost per pair of skates has been determined as follows: $\begin{array}{ll}
\text { Direct materials } & \$ 80 \
\text { Direct labor } & 60 \
\text { Variable overhead } & 30 \
\text { Fixed overhead (allocated) } & 20
\end{array}$
Other non-manufacturing costs associated with each pair of skates are: $\begin{array} { l l }
\text {Variable selling cost (commission)}& \$25\
\text { Fixed selling and administrative cost } & 10 \end{array}$ Assume the commission on the sale of skates to the National Hockey League would be reduced to $15 per pair and that available production capacity exists to produce the 1,000 pairs of skates, the lowest price the firm can bid is some price greater than:

Question

Greenland Sports, Inc. has been asked to submit a bid to the National Hockey League on supplying 1,000 pairs of professional quality skates. The cost per pair of skates has been determined as follows: $\begin{array}{ll}
\text { Direct materials } & \$ 80 \
\text { Direct labor } & 60 \
\text { Variable overhead } & 30 \
\text { Fixed overhead (allocated) } & 20
\end{array}$
 Other non-manufacturing costs associated with each pair of skates are: $\begin{array} { l l } 
\text {Variable selling cost (commission)}& \$25\
\text { Fixed selling and administrative cost } & 10 \end{array}$ Assume the commission on the sale of skates to the National Hockey League would be reduced to $15 per pair and that available production capacity exists to produce the 1,000 pairs of skates, the lowest price the firm can bid is some price greater than:

Quizplus · Accepted Answer

The lowest price should cover all variable costs: Direct materials ($80) + Direct labor ($60) + Variable overhead ($30) + Reduced commission ($15) = $185. Fixed costs are not relevant as they are sunk costs and capacity is available.

Greenland Sports, Inc Other Non-Manufacturing Costs Associated with Each Pair of Skates Are