Question

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 - 28,000 = $82.57 $ 868,000 812,000 56,000 56,000 220,000 300,000 $2,312,000 Required a. Sunny Motels has offered to buy a batch of 400 blankets for $62 each. Munoz's normal selling price is $94 per unit. Calculate the relevant cost per unit for the special order. Based on the preceding quantitative data, should Munoz accept the special order? b. Sunny offered to buy a batch of 2,000 blankets for $67 per unit, calculate the relevant cost per unit for the special order. Should Munoz accept the special order? (For all requirements, round "Cost per unit" to 2 decimal places.) a. Cost per unit Should Munoz accept the special order? Cost per unit Should Munoz accept the special order? b.

Answer 1

Based on the information available in the question, we can answer as follows:-

Part A:-

The relevant costs in accepting the special order are :-

Particulars	Amount
Materials($31 * 400)	12,400
Labor cost($29 * 400)	11,600
Manufacturing supplies($2 * 400)	800
Batch level costs ($4,000 * 1)	4,000
Total Costs	28,800
No.of units	400
Cost per unit	72

The price offered by Sunny motels is $62 which is lesser than the cost per unit of $72 to Munoz Quilting company. Hence, the order should Not Be Accepted.

Part B:-

Particulars	Amount
Materials($31 * 2000)	62,000
Labor cost($29 * 2000)	58,000
Manufacturing supplies($2 * 2000)	4,000
Batch level costs ($4,000 * 1)	4,000
Total Costs	128,000
No.of units	2,000
Cost per unit	64

The price offered by Sunny motels is $67 which is higher than the cost per unit of $64 to Munoz Quilting company. Hence, the order should Be Accepted.

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