Question

In: Accounting

Homerun Corporation produces baseball bats for kids that it sells for $38 each. At? capacity, the...

Homerun Corporation produces baseball bats for kids that it sells for $38 each. At? capacity, the company can produce 36,000

bats a year. The costs of producing and selling 36,000 bats are as? follows:

?(Click to view the? costs.)

	Cost per Bat	Total Costs
Direct materials	$12	$432,000
Direct manufacturing labor	2	72,000
Variable manufacturing overhead	2	72,000
Fixed manufacturing overhead	7	252,000
Variable selling expenses	4	144,000
Fixed selling expenses	5	180,000
Total costs	$32	$1,152,000

Read the requirements

Suppose

CleanUpCleanUp

is currently producing and selling

26 comma 00026,000

bats. At this level of production and? sales, its fixed costs are the same as given in the preceding table.

MusialMusial

Corporation wants to place a? one-time special order for

6 comma 0006,000

bats at

$ 22$22

each.

CleanUpCleanUp

will incur no variable selling costs for this special order. Should

CleanUpCleanUp

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

Now suppose

CleanUpCleanUp

is currently producing and selling

32 comma 00032,000

bats. If

CleanUpCleanUp

accepts

MusialMusial?'s

offer it will have to sell

6 comma 0006,000

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

CleanUpCleanUp

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

CleanUpCleanUp

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

$ 34$34

per? bat? (c) What other factors should

CleanUpCleanUp

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

Requirement 1.

Suppose Homerun is currently producing and selling 26,000 bats. At this level of production and? sales, its fixed costs are the same as given in the preceding table. Musial Corporation wants to place a? one-time special order for 10,000 bats at $ 30 each. Homerun will incur no variable selling costs for this special order. Should Homerun 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.)



Increase (decrease) in operating income if order is accepted

Solutions

Expert Solution

ekkarill92 answered 10 months ago

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