Question

Problem 13-24 Effect of order quantity on special order decision LO 13-2

Baird Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Baird made 26,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here.

Materials Cost ($27 per unit x 26,000)	$702,000
Labor Cost ($21 per unit x 26,000)	546,000
Manufacturing Supplies ($2 x 26,000)	52,000
Batch-level Costs (26 batches at $4,000 per batch)	104,000
Product-level Costs	200,000
Facility-level Costs	310,000
Total Costs	1,914,000
Cost per unit = 1,914,000 / 26,000 = $73.6

Required

1. Sunny Motels has offered to buy a batch of 400 blankets for $58 each. Baird’s normal selling price is $94 per unit. Calculate the relevant cost per unit for the special order. Based on the preceding quantitative data, should Baird accept the special order?

2. Sunny offered to buy a batch of 1,000 blankets for $58 per unit, calculate the relevant cost per unit for the special order. Should Baird accept the special order?

(For all requirements, round "Cost per unit" to 2 decimal places.)

a.	Cost per unit
	Should Baird accept the special order?	Yes or No
b.	Cost per unit
	Should Baird accept the special order?	Yes or No

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.