Answer the following questions using the information below:
Gold Coast Freshair (GCF)manufactures single room-sized air conditioners.The cost accounting system estimates manufacturing costs to be $120 per air conditioner,consisting of 75% variable costs and 25% fixed costs.The company has surplus capacity available.It is GCF's policy to add a 40% mark-up to full costs.
-GCF is invited to bid on a one-time-only special order to supply 50 air conditioners.What is the lowest price GCF should bid on this special order?
A)$4750
B)$4500
C)$6175
D)$6250

Question

Quizplus · Accepted Answer

The lowest price GCF should bid is based on covering the variable costs since there is surplus capacity. The variable cost per unit is 75% of $120, which is $90. For 50 units, the total variable cost is 50 * $90 = $4500.

Answer the Following Questions Using the Information Below