Bates Golf Supply produces a golf bag that sells for $220.Although the company's production capacity is 5,000 bags per year,only 4,000 bags are currently being produced and sold.The production costs for 4,000 bags are as follows:
$$\begin{array} { l r }
\text { Unit-level material cost } & \$ 300,000 \
\text { Unit-level labor cost } & 240,000 \
\text { Unit-level overhead } & 75,000 \
\text { Batch-level setup costs (500 units per batch) } & 16,000 \
\text { Product-level costs } & 20,000 \
\text { Allocated facility-level costs } & 25,000
\end{array}$$ Golf Mart Stores has offered to purchase 1,000 golf bags as a one-time special purchase at a price of $170 per bag.
Required:
1)Prepare a quantitative analysis that indicates whether the special order should be accepted.
2)What qualitative factors should be considered in this special order decision?

Question

Bates Golf Supply produces a golf bag that sells for $220.Although the company's production capacity is 5,000 bags per year,only 4,000 bags are currently being produced and sold.The production costs for 4,000 bags are as follows:
 $$\begin{array} { l r } 
\text { Unit-level material cost } & \$ 300,000 \
\text { Unit-level labor cost } & 240,000 \
\text { Unit-level overhead } & 75,000 \
\text { Batch-level setup costs (500 units per batch) } & 16,000 \
\text { Product-level costs } & 20,000 \
\text { Allocated facility-level costs } & 25,000
\end{array}$$ Golf Mart Stores has offered to purchase 1,000 golf bags as a one-time special purchase at a price of $170 per bag.
Required:
1)Prepare a quantitative analysis that indicates whether the special order should be accepted.
2)What qualitative factors should be considered in this special order decision?

Quizplus · Accepted Answer

The Answer of Bates Golf Supply produces a golf bag that sells for $220.Although the company's production capacity is 5,000 bags per year,only 4,000 bags are currently being produced and sold.The production costs for 4,000 bags are as follows:
 $$\begin{array} { l r } 
\text { Unit-level material cost } & \$ 300,000 \
\text { Unit-level labor cost } & 240,000 \
\text { Unit-level overhead } & 75,000 \
\text { Batch-level setup costs (500 units per batch) } & 16,000 \
\text { Product-level costs } & 20,000 \
\text { Allocated facility-level costs } & 25,000
\end{array}$$ Golf Mart Stores has offered to purchase 1,000 golf bags as a one-time special purchase at a price of $170 per bag.
Required:
1)Prepare a quantitative analysis that indicates whether the special order should be accepted.
2)What qualitative factors should be considered in this special order decision?

Bates Golf Supply Produces a Golf Bag That Sells for $220.Although