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Jameson Corporation produces baseball bats for kids that it sells for $37 each. At capacity, the company can produce 54,000 bats a year. The costs
Jameson Corporation produces baseball bats for kids that it sells for $37 each. At capacity, the company can produce 54,000 bats a year. The costs of producing and selling 54,000 bats are as follows: Cost per bat Total costs Direct materials $14 $756,000 Direct labor 4 216,000 Variable manufacturing overhead 2 108,000 Fixed manufacturing overhead 5 270,000 Variable selling expenses 2 108,000 Fixed selling expenses 162,000 Total costs $30 $1,620,000 7 Required: Suppose Jameson is currently producing and selling 44,000 bats. At this level of production and sales, its fixed costs are the same as given in the preceding table. Sporty Corporation wants to place a one-time special order for 10,000 bats at $21 each. Jameson will incur no variable selling costs for this special order. What is the financial advantage (disadvantage) of accepting this one-time special order? On financial considerations alone, should Jameson accept this special order? (5 marks) Now suppose Jameson is currently producing and selling 54,000 bats. If Jameson accepts Sporty's offer, it will have to sell 10,000 fewer bats to its regular customers. What is the financial advantage (disadvantage) of accepting this one-time special order? On financial considerations alone, should Jameson accept this special order? (3 marks) (ii)
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