# Acc202 Survey of Accounting: P13-23 Ellis Quilting Company makes blankets that it markets

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Acc202 Survey of Accounting

Problem: 13-23 Effects of order quantity on special order decision

Ellis Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Ellis made 20,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here.

Material cost ($25 per unit x 20,000) 500,000

Labor cost ($22 per 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 1,510,000

Cost per unit = $1,510,000/20,000 = $75.50

Required:

1. Kent Motels has offered to buy a batch of 500 blankets for $56 each. Ellisâ€™s normal selling price is $90 per unit. Based on the preceding quantitative data, should Ellis accept the special order? Support your answer with appropriate computations.

2. Would your answer to Requirements a change if Kent offered to buy a batch of 1,000 blankets for $56 per unit? Support your answer with appropriate computations.

3. Describe the qualitative factors that Ellis Quilting Company should consider before accepting a special order to sell blankets to Kent Motels.

Acc202 Survey of Accounting

Problem: 13-23 Effects of order quantity on special order decision

Ellis Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Ellis made 20,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here.

Material cost ($25 per unit x 20,000) 500,000

Labor cost ($22 per 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 1,510,000

Cost per unit = $1,510,000/20,000 = $75.50

Required:

1. Kent Motels has offered to buy a batch of 500 blankets for $56 each. Ellisâ€™s normal selling price is $90 per unit. Based on the preceding quantitative data, should Ellis accept the special order? Support your answer with appropriate computations.

2. Would your answer to Requirements a change if Kent offered to buy a batch of 1,000 blankets for $56 per unit? Support your answer with appropriate computations.

3. Describe the qualitative factors that Ellis Quilting Company should consider before accepting a special order to sell blankets to Kent Motels.

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