Levy Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Levy made 20,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here.
Materials cost ($20 per unit × 20,000) $ 400,000
Labor cost ($18 per unit × 20,000) 360,000
Manufacturing supplies ($3 × 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:
1. Rios Motels has offered to buy a batch of 500 blankets for $47 each. Levy's normal selling price is $90 per unit, calculate the relevant cost per unit for the special order.
2. Should Levy accept the special order?
Yes
No
1. Rios offered to buy a batch of 1,000 blankets for $56 per unit, calculate the relevant cost per unit for the special order.
2. Should Levy accept the special order?