Lusakasa Corporation produces baseball bats for kids that it sells for $32 each. At capacity, the company can produce 50,000 bats a year. The costs of producing and selling 50,000 bats are as follows.

Cost per BatTotal Costs

Direct materials$12$600, 000

Direct manufacturing labour 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 costs$27$1,350,000

1. Suppose Lusakasa is currently producing and selling 40,000 bats. At this level of production and sales is fixed costs are the same as given in the preceding table. Rufusa Corporation wants to place a one-time special order for 10,000 bats at $25 each. Lusakasa will incur no variable selling costs for this special order. Should Lusakasa accept this one-time special order? Show your calculations.

2. Now suppose Lusakasa is currently producing and selling 50 000 bats. If Lusakasa accepts Rufusas offer it will have to sell 10 000 fewer bats to its regular customers.

(a) On financial considerations alone, should Lusakasa accept this one-time special order show your calculation.

(b) On financial consideration alone, at what price would Lusakasa be indifferent between accepting the special order and continue to sell to its regular customers at K32 per bat.

(c) What other factors should Lusakasa consider in deciding whether to accept the one-time special order.