Requirement 2. Now suppose

Diamond

is currently producing and selling

36,000

bats. If

Diamond

accepts

Ruth's

offer it will have to sell

14,000

fewer bats to its regular customers. (a) On financial considerations alone, should

Diamond

accept this one-time special order? Show your calculations. (b) On financial considerations alone, at what price would

Diamond

be indifferent between accepting the special order and continuing to sell to its regular customers at

$38

per bat? (c) What other factors should

Diamond

consider in deciding whether to accept the one-time special order?

(a) On financial considerations alone, should

Diamond

accept this one-time special order? Show your calculations.

Determine the effect on operating income if the order is accepted. (Enter decreases in operating income with parentheses or a minus sign.)

Revenues from special order	$350,000
Variable manufacturing costs	(280,000)
Contribution margin foregone	266000 wrong
Increase (decrease) in operating income if order is accepted	-196000 wrong

	Cost per Bat	Total Costs
Direct materials	$15	$540,000
Variable direct manufacturing labor	3	108,000
Variable manufacturing overhead	2	72,000
Fixed manufacturing overhead	6	216,000
Variable selling expenses	2	72,000
Fixed selling expenses	2	72,000
Total costs	$30	$1,080,000