Incremental administrative costs	$2,450 per 1,000 blankets
Special fee**	$0.50 per blanket
Material usage	6 pounds per blanket
Production rate	4 blankets per direct labor hour
Effective tax rate	35%

^*Direct machine costs consist of items such as special lubricants, replacement of needles used in stitching, and maintenance costs. These costs are not included in the normal overhead rates.

^**Otero recently developed a new blanket fiber at a cost of $750,000. In an effort to recover this cost, Otero has instituted a policy of adding a $0.50 fee to the cost of each blanket using the new fiber. To date, the company has recovered $125,000. Lightner knows that this fee does not fit within the definition of full cost, as it is not a cost of manufacturing the product.

Required:

1. Calculate the minimum price per blanket that Otero Fibers could bid without reducing the company's operating income. If required, round your calculations and final answer to the nearest cent. ______ per blanket

2. Using the full-cost criteria and the maximum allowable return specified, calculate Otero Fibers' bid price per blanket. For computation of the allowable return, round the before-tax rate of return to two decimal places (for example, 15.468% rounds to 15.47%). Round your final answer to the nearest cent. Round all other intermediate computations to two decimal places. ______ per blanket