P11-34 (similar to) Question Help Hitter Corporation produces baseball bats for

Question

P11-34 (similar to) Question Help Hitter Corporation produces baseball bats for kids that it sells for $40 each. At capacty, the company can produce 54,000 bats a year. The costs of producing and selling 54,000 bats are as follows: (Click to view the costs.) Read the requirements Requirement 1. Suppose Hitter is currently producing and selling 22,000 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 32,000 bats at $30 each. Hitter will incur no variable selling costs for this special order. Should Hitter accapt this one-time special order? Show your calculations Determine the effect on operating income if the order is accapted. (Enter decreases in operating income with parentheses or a minus sign.) Requirements Increase (decrease) in operating income if order is accepted 1. Suppose Hitter is currantly producing and slling 22,000 bats. At this level of production and sales, its foxed costs are the same as given in the preceding table. Gehrig Corporation wants to place a one-time special order for 32,000 bats at $30 each. Hitter ill incur no variable seling costs for this special order Should Hitter accept this one-time special order? Show your calculations. Data Table 2. Now suppose Hitter is currently producing and selling 54,000 bats. lf Hitter Cost per Ba Total Costs 16 S 864,000 270,000 54,000 216,000 216,000 216,000 34 1,836,000 accepts Gehrig's offer it will have to sell 32,000 fewer bats to its regular customers. (a) On financial considerations alone, should Hitter accspt this one-ime special order? Show your calculations. (b) On financial considerations alone, at what price would Hitter be indifferent between accepting the special order and continuing to sell to its regular customers at S40 per bat? (c) What other factors should Hitter consider in declding whether to accept the one-time special order? Direct materias Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total costs Print Done PrintDone

Explanation / Answer

yes offer should be accepted as it will result in incremental profit of $256000.

*Fixed cost is irrelevant as it will be incurred whether offer is accepted or not.

Incremental revenue [32000*30] 960000 Incremental cost [16+5+1]*32000 -704000 Incremental profit if order is accepted 256000

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