Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Special order, short-run pricing. Slugger Corporation produces baseball bats for kids that it sells for $36 each. At capacity, the company can produce 50,000 bats

Special order, short-run pricing. Slugger Corporation produces baseball bats for kids that it sells for $36 each. At capacity, the company can produce 50,000 bats a year. The costs of producing and selling bats are as follows:

Cost per bat Total Cost Direct Materials $13 $ 650,000 Direct Manufacturing Labor 5 250,000 Variable Manufacturing Overhead 2 100,000 Fixed Manufacturing Overhead 6 300,000 Variable Selling Expenses 3 150,000 Fixed Selling Expenses 2 100,000 Total Costs $ 31 $1,550,000

1. Suppose Slugger is currently producing and selling 40,000 bats. At this level of production and sales, its fixed costs are the same as given in the preceding table. Bench Corporation wants to place a one-time special order for 10,000 bats at $23 each. Slugger will incur no variable selling costs for this special order. Should Slugger accept this one-time special order? Show your calculations. 2. Now suppose Slugger is currently producing and selling 50,000 bats. If Slugger accepts Benchs offer it will have to sell 10,000 fewer bats to its regular customers. (a) On financial considerations alone, should Slugger accept this one-time special order? Show your calculations. (b) On financial considerations alone, at what price would Slugger be indifferent between accepting the special order and continuing to sell to its regular customers at $36 per bat? (c) What other factors should Slugger consider in deciding whether to accept the one-time special order?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing Cases

Authors: Frank A. Buckless, Mark. S. Beasley, Steven M. Glover, Douglas F. Prawitt

1st Edition

978-0130800015

More Books

Students also viewed these Accounting questions

Question

describe and present a summary of data you have collected.

Answered: 1 week ago

Question

collect, organise and store quantitative data in an effective way;

Answered: 1 week ago