Cool Air Inc., manufactures single room sized air conditioners. The cost accounting system estimates manufacturing costs to be $250 per air conditioner, consisting of 80% variable costs and 20% fixed costs. The company has surplus capacity available. It is Cool Air Inc.'s policy to add a 30% markup to full costs.
A medium sized motel chain is currently expanding and has decided to create more rooms and air condition all of its rooms, which are currently not air conditioned. Cool Air Inc. is invited to submit a bid to the motel chain. What per unit price will Cool Air Inc. most likely bid for this special order of 200 units? Assume that the price is being fixed for a long-term commitment.
A) $250.00 per unit
B) $200.00 per unit
C) $325.00 per unit
D) $300.00 per unit

Question

Quizplus · Accepted Answer

Most likely price = $250 + ($250 × 30%) = $325.00.