Cost per Bat

Total Costs

Direct materials

$13

$708,500

Direct manufacturing labour

2

109,000

Variable manufacturing overhead

2

109,000

Fixed manufacturing overhead

7

381,500

Variable selling expenses

2

109,000

Fixed selling expenses

3

163,500

Total costs

$29

$1,580,500

Corporation produces baseball bats for kids that it sells for each. At capacity, the company can produce bats a year. The costs of producing and selling bats are provided in the accompanying table. LOADING...(Click to view the costs.) RequiredLOADING... Requirement 1. Suppose is currently producing and selling bats. At this level of production and sales, its fixed costs are the same as provided in the preceding table. Corporation wants to place a one-time special order for bats at each. will incur no variable selling costs for this special order. Should 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 should accept not accept 's special order because it decreases increases operating income by $ nothing. Requirement 2. Now suppose is currently producing and selling bats. If accepts 's offer, it will have to sell fewer bats to its regular customers. (a) On financial considerations alone, should accept this one-time special order? Show your calculations. (b) On financial considerations alone, at what price would be indifferent between accepting the special order and continuing to sell to its regular customers at per bat? (c) What other factors should consider in deciding whether to accept the one-time special order? (a) On financial considerations alone, should 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

On financial consideration alone,

Slugger

should

accept

not accept

Clemente's

special order because it

decreases

increases

operating income by

$nothing.

(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 $nothing.

(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