Diamond Corporation produces baseball bats for kids that it sells for $33 each. At capacity, the company can produce 36,000 bats a year. The costs of producing and selling 36,000 bats are as follows: (Click to view the costs.) Read the requirements. Requirement 1. Suppose Diamond is currently producing and selling 34,000 bats. At this level of production and sales, its fixed costs are the same as given in the preceding table. Musial Corporation wants to place a one-time special order for 2,000 bats at $26 each. Diamond will incur no variable selling costs for this special order. Should Diamond 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.) Revenues from special order Variable manufacturing costs Increase (decrease) in operating income if order is accepted Diamond should 52,000 (30,000) 22,000 accept Musial's special order because it increases operating income by 22,000. Requirement 2. Now suppose Diamond is currently producing and selling 36,000 bats. If Diamond accepts Musial's offer it will have to sell 2,000 fewer bats to its regular customers. (a) On financial considerations alone, should Diamond accept this one-time special order? Show your calculations. (b) On financial considerations alone, at what price would Diamond be indifferent between accepting the special order and continuing to sell to its regular customers at $33 per bat? (c) What other factors should Diamond consider in deciding whether to accept the one-time special order? (a) On financial considerations alone, should Diamond 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 Data Table Cost per Bat Total Costs Direct materials 11 $ 396,000 Variable direct manufacturing labor Variable manufacturing overhead 3 108,000 1 36,000 Fixed manufacturing overhead 5 180,000 Variable selling expenses 2 72,000 6 216,000 Fixed selling expenses Total costs $ 28 $ 1,008,000 Print Done - Requirements 1. Suppose Diamond is currently producing and selling 34,000 bats. At this level of production and sales, its fixed costs are the same as given in the preceding table. Musial Corporation wants to place a one-time special order for 2,000 bats at $26 each. Diamond will incur no variable selling costs for this special order. Should Diamond accept this one-time special order? Show your calculations. 2. Now suppose Diamond is currently producing and selling 36,000 bats. If Diamond accepts Musial's offer it will have to sell 2,000 fewer bats to its regular customers. (a) On financial considerations alone, should Diamond accept this one-time special order? Show your calculations. (b) On financial considerations alone, at what price would Diamond be indifferent between accepting the special order and continuing to sell to its regular customers at $33 per bat? (c) What other factors should Diamond consider in deciding whether to accept the one-time special order? Print Done