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 50,000 bats are as follows: Cost per Bat Total costs 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 Additional information: Suppose Slugger is currently producing and selling 40,000 bas. At this level of production and sales, its fixed costs are the same as given in preceding table. Bench Corporation wants to place a one-time special order for 10,000 bats at $23 each. Suppose Slugger will incur no variable selling costs for this special order. Q2-2. List all assumptions when Slugger makes the special order decision. Q2-3. Should Slugger accept this one-time special order? Show your calculations and clearly identify relevant revenues and costs information.
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 50,000 bats are as follows: Cost per Bat Total costs 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 Additional information: Suppose Slugger is currently producing and selling 40,000 bas. At this level of production and sales, its fixed costs are the same as given in preceding table. Bench Corporation wants to place a one-time special order for 10,000 bats at $23 each. Suppose Slugger will incur no variable selling costs for this special order. Q2-2. List all assumptions when Slugger makes the special order decision. Q2-3. Should Slugger accept this one-time special order? Show your calculations and clearly identify relevant revenues and costs information.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 50,000 bats are as follows:
|
|
Cost per Bat |
Total costs |
|
Direct materials |
$13 |
$650,000 |
|
Direct manufacturing labor |
5 |
250,000 |
|
Variable manufacturing |
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 |
Additional information:
- Suppose Slugger is currently producing and selling 40,000 bas. At this level of production and sales, its fixed costs are the same as given in preceding table.
- Bench Corporation wants to place a one-time special order for 10,000 bats at $23 each.
- Suppose Slugger will incur no variable selling costs for this special order.
Q2-2. List all assumptions when Slugger makes the special order decision.
Q2-3. Should Slugger accept this one-time special order? Show your calculations and clearly identify relevant revenues and costs information.
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