CleanUp Corporation produces baseball bats for kids that it sells for $34 each. At capacity, the company can produce 40,000 bats a year. The costs of producing and selling 40,000 bats are as follows: (Click to view the costs.) Read the requirements SOS Requirement 1. Suppose CleanUp is currently producing and selling 22,000 bats. At this level of production and sales, its fixed costs are the same as given in the preceding table Gehrig Corporation wants to place a one-time special order for 18,000 bats at $22 each. CleanUp will incur no variable selling costs for this special order. Should CleanUp accept this one-time special order? Show your calculations. Determine the effect on operating income if the order is accepted. (Enter decreases in operating income with parentheses or a minus sign.) Increase (decrease) in operating income order is accepted CleanUp should Gehrig's special order because it operating income by Requirement 2. Now suppose CleanUp is currently producing and selling 40,000 bats. If CleanUp accepts Gehrig's offer it will have to sell 18,000 fewer bats to its regular customers. (a) On financial considerations alone, should CleanUp accept this one-time special order? Show your calculations. (b) On financial considerations alone, at what price would CleanUp be indifferent between accepting the special order and continuing to sell to its regular customers at $34 per bat? (c) What other factors should CleanUp consider in deciding whether to accept the one-time special order? (a) On financial considerations alone, should CleanUp accept this one-time special order? Show your calculations Determine the effect on operating income if the order is accepted. (Enter decreases in operating income with parentheses or a minus sign.) Increase (decrease) in operating income order is accepted Gehrig's special order because it On financial consideration alone, CleanUp should operating income by (b) On financial considerations alone, at what price would CleanUp be indifferent between accepting the special order and continuing to sell to its regular customers at $34 per bat? CleanUp would be indifferent between accepting the special order and continuing to sell to its regular customers at $34 per bat if the special selling price was (c) What other factors should CleanUp consider in deciding whether to accept the one-time special order? O A. Can the company afford to adopt the special order price long-term or with other customers who may ask for price concessions? OB. Determine if the possibility of future long-term sales from Gehrig seems likely O C. The effect on customer relationships by refusing sales from existing customers. OD. All of the above Data table Direct materials Variable direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Cost per Bat Total Costs $ 15 $ 600,000 4 160,000 1 40,000 4 160,000 1 40,000 2 80,000 Fixed selling expenses $ 27 $ 1,080.000 Total costs
