Levy Quilting Company makes blankets that it markets through a variety of department stores. It makes the
Question:
Materials cost ($20 per unit x 20,000) ......... $ 400,000
Labor cost ($18 per unit x 20,000) ........... 360,000
Manufacturing supplies ($3 x 20,000) ......... 60,000
Batch-level costs (20 batches at $4,000 per batch) .... 80,000
Product-level costs ................. 160,000
Facility-level costs ................. 290,000
Total costs .................... $1,350,000
Cost per unit – $1,350,000 ÷ 20,000 – $67.50
Required
a. Rios Motels has offered to buy a batch of 500 blankets for $47 each. Levy’s normal selling price is $90 per unit. Based on the preceding quantitative data, should Levy accept the special order? Support your answer with appropriate computations.
b. Would your answer to Requirement a change if Rios offered to buy a batch of 1,000 blankets for $56 per unit? Support your answer with appropriate computations.
c. Describe the qualitative factors that Levy Quilting Company should consider before accepting a special order to sell blankets to Rios Motels.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-0078025655
7th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Old
Question Posted: