Question 4 Sports Direct Co. produces Tennis bats for children that it sells for 50 each. At capacity, the company can produce 40,000 bats a year. The costs of producing and selling 40,000 bats are as follows: Cost per Bat (E) 15 3 1 Direct materials Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total costs Total Costs (E) 600,000 120,000 40,000 200,000 80,000 160,000 1,200,000 5 2 4 30 Sports Direct is currently producing and selling 35,000 bats. At this level of production and sales, its fixed costs are the same as given in the table above. Ripkin Corporation, a potential new customer, wants to place a one-time special order for 5,000 bats at 38 each. Sports Direct will save half its variable selling costs as well as 50,000 fixed manufacturing overhead for this special order. Required a) Should Sports Direct accept this one-time special order? Show ALL your calculations. (8 marks) Now assume Sports Direct is currently producing and selling 40,000 bats. If Sports Direct accepts Ripkin's offer it will have to sell 5,000 fewer bats to its regular customers. b) On financial considerations alone, should Sports Direct accept this one-time special order? Show your calculations. (7 marks) c) On financial considerations alone, at what price would Sports Direct be indifferent between accepting the special order and continuing to sell to its regular customers at 50 per bat