Homework Answers
Answer
| a. | (Relevant) Cost per Unit | $60.00 |
| Should Baird accept the special order | No | |
| b. | (Relevant) Cost per Unit | $54.00 |
| Should Baird accept the special order | Yes |
Calculations
a) Relevant Cost for 400 Blankets
| Particulars | Amount |
|
Material Costs ($27*400) Labour Cost ($21*400) Manufacturing Supplies ($2*400) Batch-Level Costs (1 batch* $4,000) |
$10,800 $8,400 $800 $4,000 |
| Total Costs | $24,000 |
So,Relevant Cost per unit for special order of 400 blankets = Total Costs/Units
= $24,000/400
= $60.00 per unit
No,Baird should not accept the special order.
Since the offer price ($58) is less than the relevant cost ($60),Baird should not accept the special order.The Company will incur a loss of $2 per unit if the special order is accepted.
b) Relevant Costs for 1000 Blankets
| Particulars | Amount |
|
Material Costs ($27*1000) Labour Costs ($21*1000) Manufacturing Supplies ($2*1000) Batch Level Cost (1 batch*4000) |
$27,000 $21,000 $2,000 $4,000 |
| Total Costs | $54,000 |
So,Relevant Cost per unit for special order of 1000 blankets = Total Costs/Units
= $54,000/1000
= $54.00 per unit
Yes,Baird should accept the special order.Since the offer Price($58) is more than relevant cost ($54),Baird should accept this special order.As a result,the company will incur a profit of $4 per unit.
Notes
- Variable Costs are always relevant as they are incurred when order is actually produced.Here,Material Cost,Labour Costand Manufacturing Supplies are relevant costs since they are variable.
- Batch Level Cost is also relevant cost as it is variable per batch.It's incurred as and when a new batch is produced.
- Product-Level costs and Facility-Level Costs are irrelevant costs(sunk costs) as they continue to occur whether or not special order is accepted.So,they are not relevant to the decision of order and therefore ignored.
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Baird Quilting Company makes blankets that it markets through a variety of department stores. It makes...
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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) Labor cost ($21 per unit x 26,000) Manufacturing supplies ($2 * 26,000) Batch-level costs (26 batches at $4,000 per batch) Product-level costs Facility-level costs Total costs Cost per unit - $1,914,000 +...
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period. The cost of producing the blankets is summarized
here.
Sunny Motels has offered to buy a batch of 400 blankets for $60
each. Finch’s normal selling price is $96 per unit. Calculate the
relevant cost per unit for the special order. Based on the
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Finch Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in b...
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Zachary Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,500 units. Zachary made 20,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here. Materials cost ($26 per unit × 20,000) $ 520,000 Labor cost ($22 per unit × 20,000) 440,000 Manufacturing supplies ($3 × 20,000) 60,000 Batch-level costs (20 batches at $3,000 per batch) 60,000 Product-level costs 320,000 Facility-level costs 390,000 Total...
Munoz Quilting Company makes blankets that it markets through a variety of department stores. It makes...
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Jordan Quilting Company makes blankets that it markets through a variety of department stores. It makes...
Jordan Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 2.500 units. Jordan made 25,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here. Materials cost ($30 per unit * 25,000) Labor cost ($24 per unit * 25,000) Manufacturing supplies ($7 * 25,000) Batch-level costs (10 batches at $5,eee per batch) Product-level costs Facility-level costs Total costs Cost per unit = $2,065,000 +...
Jordan Quilting Company makes blankets that it markets through a variety of department stores. It makes...
Jordan Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 2,500 units. Jordan made 25,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here. Materials cost ($30 per unit 25,000) Labor cost $24 per unit x 25,000) Manufacturing supplies ($7 ~ 25,000) Batch-level costs (10 batches at $5,000 per batch) Product-level costs Facility-level costs Total costs Cost per unit = $2,065,000 = 25,000...
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Baird Chemical Company makes a variety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging. Baird produces a relatively small amount (17,000 units) of the cream and is considering the purchase of the product from an outside supplier for $4.70 each. If Baird purchases from the outside supplier, it would continue to sell and distribute the cream under its own brand name. Baird's accountant constructed the following profitability analysis: Revenue (17,000 units...
Baird Chemical Company makes a variety of cosmetic products, one of which is a skin cream...
Baird Chemical Company makes a variety of cosmetic products, one
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Baird produces a relatively small amount (17,000 units) of the
cream and is considering the purchase of the product from an
outside supplier for $4.70 each. If Baird purchases from the
outside supplier, it would continue to sell and distribute the
cream under its own brand name. Baird’s accountant constructed the
following profitability analysis:
Identify the cost...
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) Labor cost ($21 per unit x 26,000) Manufacturing supplies ($2 * 26,000) Batch-level costs (26 batches at $4,000 per batch) Product-level costs Facility-level costs Total costs Cost per unit - $1,914,000 +...
Finch Quilting Company makes blankets that it markets through a
variety of department stores. It makes the blankets in batches of
1,000 units. Finch made 26,000 blankets during the prior accounting
period. The cost of producing the blankets is summarized
here.
Sunny Motels has offered to buy a batch of 400 blankets for $60
each. Finch’s normal selling price is $96 per unit. Calculate the
relevant cost per unit for the special order. Based on the
preceding quantitative data, should...
Munoz Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 2,000 units. Munoz made 28,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here. Materials cost ($31 per unit x 28,000) Labor cost ($29 per unit x 28,000) Manufacturing supplies ($2 x 28,000) Batch-level costs (14 batches at $4,000 per batch) Product-level costs Facility-level costs Total costs Cost per unit = $2,312,000 -...
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Jordan Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 2,500 units. Jordan made 25,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here. Materials cost ($30 per unit 25,000) Labor cost $24 per unit x 25,000) Manufacturing supplies ($7 ~ 25,000) Batch-level costs (10 batches at $5,000 per batch) Product-level costs Facility-level costs Total costs Cost per unit = $2,065,000 = 25,000...
Baird Chemical Company makes a variety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging. Baird produces a relatively small amount (17,000 units) of the cream and is considering the purchase of the product from an outside supplier for $4.70 each. If Baird purchases from the outside supplier, it would continue to sell and distribute the cream under its own brand name. Baird's accountant constructed the following profitability analysis: Revenue (17,000 units...
Baird Chemical Company makes a variety of cosmetic products, one
of which is a skin cream designed to reduce the signs of aging.
Baird produces a relatively small amount (17,000 units) of the
cream and is considering the purchase of the product from an
outside supplier for $4.70 each. If Baird purchases from the
outside supplier, it would continue to sell and distribute the
cream under its own brand name. Baird’s accountant constructed the
following profitability analysis:
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