Dalton Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Dalton made 20,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here. Materials cost ($10 per unit * 20,000) $ 200,000 Labor cost ($9 per unit * 20,000) 180,000 Manufacturing supplies ($1.50 * 20,000) 30,000 Batch-level costs (20 batches at $2,000 per batch) 40,000 Product-level costs 80,000 Facility-level costs 145,000 Total costs $ 675,000 Cost per unit = $675,000 : 20,000 = $33.75RequiredSunny Motels has offered to buy a batch of 500 blankets for $23.50 each. Dalton's normal selling price is $45 per unit. Calculate the relevant cost per unit for the special order. Based on the preceding quantitative data, should Dalton accept the special order?

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Business

Kamila Russell

25 May, 04:11

Dalton Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Dalton made 20,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here. Materials cost ($10 per unit * 20,000) $ 200,000 Labor cost ($9 per unit * 20,000) 180,000 Manufacturing supplies ($1.50 * 20,000) 30,000 Batch-level costs (20 batches at $2,000 per batch) 40,000 Product-level costs 80,000 Facility-level costs 145,000 Total costs $ 675,000 Cost per unit = $675,000 : 20,000 = $33.75RequiredSunny Motels has offered to buy a batch of 500 blankets for $23.50 each. Dalton's normal selling price is $45 per unit. Calculate the relevant cost per unit for the special order. Based on the preceding quantitative data, should Dalton accept the special order?

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Tori Houston · Answer 1

The offer made by Sunny Motels should be accepted because it covers the variable costs with a surplus of $3. Nonetheless, it should be taking into consideration if the company has unused capacity or whether the offer affects previous sales with other costumers, etc.

Explanation:

Giving the following information:

It makes the blankets in batches of 1,000 units.

Dalton made 20,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here.

Materials cost ($10 per unit * 20,000) = $ 200,000

Labor cost ($9 per unit * 20,000) = 180,000

Manufacturing supplies ($1.50 * 20,000) = 30,000

Batch-level costs (20 batches at $2,000 per batch) = 40,000 Product-level costs 80,000

Facility-level costs 145,000

Total costs $ 675,000 Cost per unit = $675,000 : 20,000 = $33.75

RequiredSunny Motels has offered to buy a batch of 500 blankets for $23.50 each. Dalton's normal selling price is $45 per unit.

Relevant costs:

Direct materials = $10

Direct labor = $9

Manufacturing supplies = 1.5

Total variable cost = $20.5

The offer made by Sunny Motels should be accepted because it covers the variable costs with a surplus of $3. Nonetheless, it should be taking into consideration if the company has unused capacity or whether the offer affects previous sales with other costumers, etc.