Question
Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Global Sports Cards with a special order. The Hall of Fame wants to
Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Global Sports Cards with a special order. The Hall of Fame wants to purchase 58,000 baseball card packs for a special promotional campaign and offers $0.41 per pack, a total of $23,780.
Global Sports Cards's total production cost is $0.61 per pack, as follows:
Variable costs: |
|
Direct materials. . . . . . . . . . . . . . . | $0.12 |
---|---|
Direct labor. . . . . . . . . . . . . . . . . . | 0.08 |
Variable overhead. . . . . . . . . . . | 0.11 |
Fixed overhead. . . . . . . . . . . . . . . . . . | 0.30 |
Total cost. . . . . . . . . . . . . . . . . . . . . . . | $0.61 |
Requirement 1. Prepare an incremental analysis to determine whether
Global Sports Cards should accept the special sales order assuming fixed costs would not be affected by the special order. (Enter a "0" for any zero balances. Use parentheses or a minus sign to indicate a decrease in operating income from the special order.)
| Total Order | |
---|---|---|
Incremental Analysis of Special Sales Order Decision | Per Unit | (58,000 units) |
Revenue from special order |
|
|
Less variable expense associated with the order: |
| |
Variable manufacturing costs |
| |
Contribution margin |
|
|
Less: Additional fixed expenses associated with the order |
|
|
Increase (decrease) in operating income from the special order |
|
|
2. Now assume that the Hall of Fame wants special hologram baseball cards. Global Sports Cards must spend $4,800 to develop this hologram, which will be useless after the special order is completed. Should Global Sports Cards accept the special order under these circumstances? Show your analysis.
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