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

Required:

a. Quality Motels has offered to buy a batch of 500 blankets for \($55\) each. Bogati’s normal selling price is \($90\) per unit. Based on the preceding quantitative data, should Bogati accept the special order? Support your answer with appropriate computations.

b. Would your answer to Requirement a change if Quality offered to buy a batch of 1,000 blankets for \($55\) per unit? Support your answer with appropriate computations.

c. Describe the qualitative factors that Bogati Quilting Company should consider before accepting a special order to sell blankets to Quality Motels.

Transcribed Image Text:

Materials cost ($20 per unit X 20,000) Labor cost ($25 per unit X 20,000) Manufacturing supplies ($3 20,000) Batch-level costs (20 batches at $4,000 per batch) $ 400,000 500,000 60,000 80,000 Product-level costs 140,000 Facility-level costs 300,000 Total costs $1,480,000 Cost per unit = $1,480,000 20,000 = $74