Oeero Fibers, Inc, specalzes in the manufacture of synthetic feers that the company uses wn many products such as blankets, coats, and undforms for polbce and feelighters. Otero has been in business since 1985 and has been profitable every year since 1993. The company uses a standard cost system and apples overhead on the bass of drect labor hours Otero has recently received a request to bid on the manufacture of 800,000 blankets scheduled for delivery to several miltary bases. The bed must be stated at full cont per unt plus a return on full cont of so more than 10 percent lter income taxes. Full cost has been defined as including all variable costs of manulacturing the product, a reasonable amount of fixed overhead, and reasonalble incremental admnistrative costs associated with the manfacture and sale of the product. The contractor has indicated that beds in excess of $30 per blanket are not likely to be considered In order to prepare the bid for the 800,000 blankets, Andrea Lightner, cost accountant, has gathered the foilowing information about the costs associated with the production of the blankets Direct labor Deect machine costs Variable overhead Fixed overe lncremental administrative costs Spenal $1.70 per pound of ibers $6.50 per hour 10.00 per blanket $3.00 per direct labor hor $8.00 per direct labor hou $2,450 per 1,000 kets Production rate EHective tax rate Dwrect machine costs consist of Rems such as special ubricants, roplacement of needes used in stitching, and mantenance couts. hse costs are not ncluded in the normal overhead rates 6 pounds per blanket 4 blankets per drect labor hour 35% ero recently ped a new tanket fter at a cost of S750,000 In an e-sort to recover tus cost, Otero has manned , poky of aldn..so.sofee to the cost of each blanket using the new fbe. To te, te conginy has recovered S 125.000. Lightner knows that tus tee does fit within the definton of h. cost, as non ? cost of mantotunng the proba