(CMA)Callow Company has considerable excess manufacturing capacity. A special job order's cost sheet includes the following allocated manufacturing overhead costs: Fixed costs $42,000
Variable costs 66,000
The fixed costs include a normal $7,400 allocation for in-house design costs, although no in-house design will be done. Instead, the job will require the use of external designers costing $15,500. What is the total amount to be included in the calculation to determine the minimum acceptable price for the job?
A)$73,000
B)$81,500
C)$108,000
D)$116,100

Question

Quizplus · Accepted Answer

The total amount to be included in the calculation to determine the minimum acceptable price for the job is:
Fixed costs + variable costs + external design costs
= $42,000 + $66,000 + $15,500
= $123,500
However, since the fixed costs already include a normal allocation for in-house design costs of $7,400, this amount should be deducted from the total amount.
Therefore, the minimum acceptable price for the job is $123,500 - $7,400 = $116,100.
Option B is the correct answer, as it represents the minimum acceptable price for the job.

(CMA)Callow Company Has Considerable Excess Manufacturing Capacity