Ellis Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Ellis made 20,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here.
Materials cost ($25 per unit x 20, 0000) $500,000
Labor Cost ($22 per unit x 20,000)440,000
Manufacturing supplies ($2 x 20,000)40,000
Batch level costs (20 batches at $4000 per batch80, 000
Product level costs160, 000
Facility level costs290, 000
Total costs1, 510,000
Cost per unit = $1510, 000 / 20,000= $75.50
Question
Describe the qualitative factors that Ellis Quilting Company should consider before accepting a special order to sell blankets to Kent Motels.
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