Assume a clinical laboratory is considering a new test. here are the key assumptions: annual fixed direct costs = $20,000. annual overhead allocation = $10,000. variable cost per test = $5. expected volume = 5,000 tests. what price should be set under marginal cost pricing?

$ 5

Explanation:

Given data:

Annual fixed direct costs = $20,000

Annual overhead allocation = $10,000

Variable cost per test = $5

Expected volume = 5,000 tests

Now,

the marginal cost does not included the fixed and the overhead costs.

Thus,

The total marginal cost for 5,000 test = Variable cost per test × Number of tests

or

The total marginal cost for 5,000 test = $ 5 × 5,000 = $ 25,000

Now,

the pricing under marginal cost = marginal cost / expected volume of test

or

the pricing under marginal cost = $ 25,000 / 5,000 = $ 5

urban company reports the following information regarding its production cost: units produced 37,000 units direct labor $ 30 per unit direct materials $ 35 per unit variable overhead $ 237,000 in total fixed overhead $ 127,000 in total

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