Special order decisions given two scenarios (Learning Objective 2)

Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Sports-Cardz with a special order. The Hall of Fame wants to purchase 50,000 baseball card packs for a special promotional campaign and offers $0.40 per pack, a total of $20,000. Sports-Cardz’s total production cost is $0.60 per pack, as follows:

Sports-Cardz has enough excess capacity to handle the special order.
Requirements 1. Prepare an incremental analysis to determine whether Sports-Cardz should accept the special sales order assuming fixed costs would not be affected by the special order.
2. Now, assume that the Hall of Fame wants special hologram baseball cards. Sports-Cardz must spend $5,000 to develop this hologram, which will be use¬ less after the special order is completed. Should Sports-Cardz accept the special order under these circumstances? Show your analysis.

Transcribed Image Text:

Variable costs: Direct materials......... $0.14 Direct labor... 0.08 Variable overhead. 0.13 Fixed overhead.......... 0.25 Total cost. $0.60