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 material $8 Direct labor 6 Variable overhead 3 Variable 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.
C
The lowest price would have to be greater than the sum of all variable manufacturing costs.
Variable manufacturing costs total $17; therefore the price would have to be greater than $17 per pair.
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