Chapter 13, Problem 24P

Problem 6-25A Effect of order quantity on special order decision

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

Materials cost ($10 per unit × 20,000)	$200,000
Labor cost ($9 per unit × 20,000)	180,000
Manufacturing supplies ($1.50 × 20,000)	30,000
Batch-level costs (20 batches at $2,000 per batch)	40,000
Product-level costs	80,000
Facility-level costs	145,000
Total costs	$675,000
Cost per unit = $675,000 ÷ 20,000 = $33,75

Required

1. a. Sunny Motels has offered to buy a batch of 500 blankets for $23.50 each. Dalton’s normal selling price is $45 per unit. Based on the preceding quantitative data, should Dalton accept the special order? Support your answer with appropriate computations.
2. b. Would your answer to Requirement a change if Sunny offered to buy a batch of 1,000 blankets for $28 per unit? Support your answer with appropriate computations.
3. c. Describe the qualitative factors that Dalton Quilting Company should consider before accepting a special order to sell blankets to Sunny Motels.