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:
$$\begin{array} { | l | r | }
\hline \text { Unit-level material cost } & \$ 300,000 \
\hline \text { Unit-level labor cost } & 240,000 \
\hline \text { Unit-level overhead } & 75,000 \
\hline \text { Batch-level setup costs ( } 500 \text { units per batch) } & 16,000 \
\hline \text { Product-level costs } & 20,000 \
\hline \text { Allocated facility-level costs } & 25,000\\hline
\end{array}$$ 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:
 $$\begin{array} { | l | r | } 
\hline \text { Unit-level material cost } & \$ 300,000 \
\hline \text { Unit-level labor cost } & 240,000 \
\hline \text { Unit-level overhead } & 75,000 \
\hline \text { Batch-level setup costs ( } 500 \text { units per batch) } & 16,000 \
\hline \text { Product-level costs } & 20,000 \
\hline \text { Allocated facility-level costs } & 25,000\\hline
\end{array}$$ 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:
 $$\begin{array} { | l | r | } 
\hline \text { Unit-level material cost } & \$ 300,000 \
\hline \text { Unit-level labor cost } & 240,000 \
\hline \text { Unit-level overhead } & 75,000 \
\hline \text { Batch-level setup costs ( } 500 \text { units per batch) } & 16,000 \
\hline \text { Product-level costs } & 20,000 \
\hline \text { Allocated facility-level costs } & 25,000\\hline
\end{array}$$ 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