Corporation produces baseball bats for kids that it sells for $34 each. At capacity, the company can produce 54,500 bats a year. The costs of producing and selling 54,500
bats are provided in the accompanying table.
Costs Cost per Bat Total Costs 13 $ 2 Direct materials Direct manufacturing labour Variable manufacturing overhead Fixed manufacturing overhead 708,500 109,000 109,000 2 7 381,500 Variable selling expenses 2 W N 109,000 163,500 3 Fixed selling expenses 29 $ 1,580,500 Total costs Print Done Requirement 1. Suppose Slugger is currently producing and selling 45,000 bats. At this level of production and sales, its fixed costs are the same as provided in the preceding table. Clemente Corporation wants to place a one-time special order for 9,500 bats at $23 each. Slugger will incur no variable selling costs for this special order. Should Slugger 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 if order is accepted Slugger should Clemente's special order because it operating income by $ Requirement 2. Now suppose Slugger is currently producing and selling 54,500 bats. If Slugger accepts Clemente's offer, it will have to sell 9,500 fewer bats to its regular customers. (a) On financial considerations alone, should Slugger accept this one-time special order? Show your calculations. (b) On financial considerations alone, at what price would Slugger be indifferent between accepting the special order and continuing to sell to its regular customers at $34 per bat? (c) What other factors should Slugger consider in deciding whether to accept the one-time special order? (a) On financial considerations alone, should Slugger 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 if order is accepted On financial consideration alone, Slugger should Clemente's special order because it operating income by $ (b) On financial considerations alone, at what price would Slugger be indifferent between accepting the special order and continuing to sell to its regular customers at $34 per bat? Slugger 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 Slugger consider in deciding whether to accept the one-time special order? A. What is the effect on customer relationships when refusing sales from existing customers? B. Can the company afford to adopt the special order price long-term or with other customers who may ask for price concessions? C. Is the possibility of future long-term sales from Clemente likely? D. All of the above
