Omaha Synthetic Fibers Inc. specializes in the manufacture of synthetic fibers that the company uses in many products such as blankets, coats, and uniforms for police and fireghters. The company has been in business for 20 years and has been protable each ofthe past 15 years. Omaha Synthetic Fibers uses a standardcosting system and applies overhead on the basis of directlabor hours. Management has recently received a requestto bid on the manufacture of 8?0,000 blankets scheduled for delivery to several military bases. The bid must be stated at full cost per unit plus a return on full cost of no more than 20 percent before income taxes. Fu|| cost has been dened as including all variable costs of manufacturing the product, a reasonable amount of fixed overhead, and reasonable incremental administrative costs associated with the manufacture and sale of the product. The contractor has indicated that bids in excess of $63 per blanket are not likely to be considered. In order to prepare the bid for the 8?0,000 blankets, Andrea Lightner, director of cost management, has gathered the following information about the costs associated with the production of the blankets. Direct material $ 4.38 per pound of fibers Direct labor $13.58 per hour Direct machine costs'( $21-39 PEI\" blanket Variable overhead $ ?.58 per directlabor hour Fixed overhead $1?.38 per directlabor hour Incremental administrative costs $6,388 per 1,888 blankets Special 'FeeJr $ 1.88 per blanket Material usage 5 pounds per blanket Production rate 2 blankets per directlabor hour a(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. TOma ha Synthetic Fibers recently developed a new blanket fiber at a cost of $50,000. In an effort to recover this cost, management has instituted a policy of adding a $0.50 fee to the cost of each blanket using the new ber. To date, the company has recovered $125,000. Lightner knows thatthis 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 Omaha Synthetic Fibers Inc. could bid without reducing the company's net income. 2. Using the full cost criteria and the maximum allowable return specied, calculate Omaha Synthetic Fibers Inc.'s bid price per blanket. 3. Assume that the price per blanket that Omaha Synthetic Fibers Inc. calculated using the costplus criteria specified is greater than the maximum bid of $63 per blanket allowed. Select the factors that management should consider before deciding whether to submit a bid at the maximum acceptable price of $63 per blanket