Question
Fun Sporting Goods, Inc., manufactures a complete line of sporting equipment. Lei Enterprises operates a large chain of discount stores. Lei has approached Fun with
Fun Sporting Goods, Inc., manufactures a complete line of sporting equipment. Lei Enterprises operates a large chain of discount stores. Lei has approached Fun with a special order for 20,000 deluxe baseballs. Instead of being packaged separately, the balls are to be packed in boxes containing 500 baseballs each. Lei is willing to pay $2.50 per baseball. Fun's standard annual expected production is 400,000 baseballs, but Fun is on track to produce 410,000 baseballs as the current year's production. Fun's maximum production capacity is 450,000 baseballs. Should they accept Lei offer.
2. What would be the minimum order price per baseball if Fun would like to earn a profit of $3,000 from the special order? Round your answer to two decimal places
The following additional information is available:
Standard unit cost data for 400,000 baseballs: | |
Direct materials | $ 1.00 |
Direct labor | 0.50 |
Overhead: | |
Variable | 0.60 |
Fixed ($100,000 400,000) | 0.25 |
Packaging per unit | 0.20 |
Advertising ($60,000 400,000) | 0.15 |
Other fixed selling and administrative expenses ($120,000 400,000) | 0.30 |
Product unit cost | $ 3.00 |
Unit selling price | $ 4.00 |
Total estimated bulk packaging costs for special order (20,000 baseballs: 500 per box) | $2,000 |
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