Levy Quilting Company makes blankets that it markets through a variety of depart
ID: 2444697 • Letter: L
Question
Levy Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 2,000 units. Levy made 28,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here. Required: a-1. Rios Motels has offered to buy a batch of 400 blankets for $67 each. Levy's normal selling price is $94 per unit, calculate the relevant cost per unit for the special order. Cost per unit a-2. Should Levy accept the special order? Yes No b-1. Rios offered to buy a batch of 2,000 blankets for $67 per unit, calculate the relevant cost per unit for the special order. Cost per unit b-2. Should Levy accept the special order? Yes NoExplanation / Answer
Levy Quilting Co Assumption : As the product is not changing , Product level costs do not change with no of batches Also facility level costs do not depend on no of batches atra batches.nd assumed not change with e So for the calculation , product level and facility level costs are being ignored. a-1 Relevant Cost for 400 qty special order Details Unit Cost $/Unit Total cost $ Material cost 31 12,400 Labor cost 29 11,600 Manufacturing Supplies 2 800 Batch level cost 4,000 Total relevant cost 28,800 Relevant cost/Unit 72 a-2 As the price offered is $67 /unit and relevant cost is $72/unit the special order should not be accepted b-1. Relevant Cost for 2000 qty special order Details Unit Cost $/Unit Total cost $ Material cost 31 62,000 Labor cost 29 58,000 Manufacturing Supplies 2 4,000 Batch level cost 4,000 Total relevant cost 128,000 Relevant cost/Unit 64 b-2. As the relevant cost for 2000 qty special order is $64/unit and the offer price is $67 , Levy should accept the offer.
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