Question
Frisco Corporation produces baseball bats for kids that it sells for $36 each. At capacity, the company can produce 50,000 bats a year. The costs
Frisco Corporation produces baseball bats for kids that it sells for $36 each. At capacity, the company can produce 50,000 bats a year. The costs of producing and selling 50,000 bats are as follows:Particulars Cost per Bat ($) Total Costs ($) Direct Materials 12 600,000 Direct Manufacturing Labor 3 150,000 Variable Manufacturing Overhead 1 50,000 Fixed Manufacturing Overhead 5 250,000 Variable Selling Expenses 2 100,000 Fixed Selling Expenses 4 200,000 Total Cost 27 13,50,000 Requirements: i. Suppose Frisco is currently producing and selling 40,000 bats. At this level of production and sales, its fixed costs are the same as given in the preceding table. LPF Corporation wants to place a one-time special order for 10,000 bats at $25 each. Frisco will incur no variable selling costs for this special order. Should Frisco accept this one-time special order? Show your calculations. ii. Now suppose Frisco is currently producing and selling 50,000 bats. If Frisco accepts LPFs offer it will have to sell 10,000 fewer bats to its regular customers. (a) On financial considerations alone, should Frisco accept this one-time special order? Show your calculations. (b) On financial considerations alone, at what price would Frisco be indifferent between accepting the special order and continuing to sell to its regular customers at $32 per bat? (c) What other factors should Frisco
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