Question

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 = $82.60 $ 750,000 600,000 175,000 50,000 200,000 290,000 $2,065,000 Required a. Sunny Motels has offered to buy a batch of 500 blankets for $64 each. Jordan's normal selling price is $90 per unit. Calculate the relevant cost per unit for the special order. Based on the preceding quantitative data, should Jordan accept the special order? b. Sunny offered to buy a batch of 2,500 blankets for $64 per unit, calculate the relevant cost per unit for the special order. Should Jordan accept the special order? (For all requirements, round "Cost per unit" to 2 decimal places.)

Answer 1

Part A

Materials cost( $30 per unit x 500)	15000
Labor cost ($24 per unit x 500)	12000
Manufacturing supplies ($7 x 500)	3500
Batch-level costs (1 batches at $5000 per batch)	5000
total relevent costs	35500
Number of units produced	500
Cost per unit	$71.00

This offer should be rejected because the cost of production per unit = $71 is higher than the offered price of $64

Part B

Materials cost( $30 per unit x 2500)	75000
Labor cost ($24 per unit x 2500)	60000
Manufacturing supplies ($7 x 2500)	17500
Batch-level costs (1 batches at $5000 per batch)	5000
total relevant costs	157500
Number of units produced	2500
Cost per unit	$63.00

This offer should be accepted because the cost of production per unit = $63 is lower than the offered price = $64