Acc202 Survey of Accounting: P12-23 Awtrey Quilting Company makes blankets that it markets through

Acc202 Survey of Accounting

Problem 12-23 Effect of order quantity on special order decision
Awtrey Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Awtrey made 20,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here.
Materials cost ($21/unit x 20,000) 420,000

Labor cost ($22/unit x 20,000) 440,000
Manufacturing supplies ($2 x 20,000) 40,000
Batch-level costs (20 batches at $4,000 per batch) 80,000
Product-level costs 160,000

Facility-level costs 290,000
Total Costs $1,430,000
Cost per unit ($1,430,000 / 20,000) $71.50

Required:
a. Sunny Motels has offered to buy a batch of 500 blankets for $51 each. Awtrey's normal selling price is $90 per unit. Based on the preceding quantitative data, should Awtrey accept the special order? Support your answer with appropriate computations.
b. Would your answer to Requirement A change if Sunny offered to buy a batch of 1,000 blankets for $51 per unit? Support your answer with appropriate computations.
c. Describe the qualitative factors that Awtrey Quilting company should consider before accepting a special order to sell blanket to Sunny Motels.
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