Reference no: EM131589927

Question - Yokohama Company produces baseball bats for kids that it sells for $36 each. At capacity, the company can produce 50,000 bats a year although company is currently producing and selling 40,000 bats. The costs of producing and selling 50,000 bats are as follows:

	Cost per Bat	Total costs
Direct materials	$13	$650,000
Direct manufacturing labour	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

Required:                           

(a) Bench Company wants to place a one-time special order for 10,000 bats at $23 each. Yokohama Company will incur no variable selling costs for this special order. Should Yokohama Company accept this one-time special order? Show your calculations.

(b) If Yokohama Company is currently producing and selling 50,000 bats, on financial consideration alone should Yokohama Company accept this one-time special order?

(c) Identify and briefly discuss other factors Yokohama Company should consider in deciding whether to accept the one-time special order.