The headquarters of a national restaurant chain is trying to better understand the profitability of the Savannah location. Savannah's total assets are $3,150,000, consisting of $900,000 land, $1,800,000 buildings and equipment, and $450,000 intangibles. The net profit is $237,500, and the required rate of return is 15.0%. Savannah's return on investment (ROI) is:
	Answer:

Hitter Corporation produces baseball bats for kids that it sells for $35 each. At capacity, the company can produce 30,000 bats a year. The costs of producing and selling 30,000 bats are as follows: (Click to view the costs.) Read the requirements. Requirement 1. Suppose Hitter is currently producing and selling 20,000 bats. At this level of production and sales, its fixed costs are the same as given in the preceding table. Gehrig Corporation wants to place a one-time special order for 10,000 bats at $23 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 $ Variable manufacturing costs $ 230,000 (180,000) 50,000 Increase (decrease) in operating income if order is accepted Hitter should accept Gehrig's special order because it increases operating income by $ 50,000 Requirement 2. Now suppose Hitter is currently producing and selling 30,000 bats. If Hitter accepts Gehrig's offer it will have to sell 10,000 fewer bats to its regular customers. (a) On financial considerations alone, should Hitter accept this one-time special or indifferent between accepting the special order and continuing to sell to its regular customers at $35 per bat? (c) What other factors should Hitter consider in deciding whether to accept the one-time special order? (a) On financial considerations alone, should Hitter 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.) Data table Revenues from special order Variable manufacturing costs 230000 (180000) Contribution margin foregone (130000) Increase (decrease) in operating income if order is accepted (80000) Direct materials Variable direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total costs Cost per Bat $ Total Costs 13 $ 390,000 4 120,000 1 30,000 7 210,000 2 60,000 3 90,000 $ 30 $ 900,000 Print Done