Answer the following questions using the information below:
Caruso Cool manufactures single room sized air conditioners. The cost accounting system estimates manufacturing costs to be $190 per air conditioner, consisting of 75% variable costs and 25% fixed costs. The company has surplus capacity available. It is Caruso Cool'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. Caruso Cool is invited to submit a bid to the motel chain. What per unit price will Caruso Cool MOST likely bid for this special order of 50 units?
A)$190.00 per unit
B)$142.50 per unit
C)$247.00 per unit
D)$250.00 per unit

Question

Quizplus · Accepted Answer

The full cost per unit is $190. Applying a 30% markup, the selling price would be $247 per unit. The question does not provide any information that suggests any deviation from the standard cost accounting system, so we can assume that the bid price will reflect the full cost plus markup. Therefore, Caruso Cool will MOST likely bid $247 per unit. Choice C is the only option that reflects this price.

Answer the Following Questions Using the Information Below