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
59,000
baseball card packs for a special promotional campaign and offers
$0.41
per pack, a total of
$24,190.
Global Sports Cards's
total production cost is
$0.61
per pack, as follows:
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(Click the icon to view the cost information.)
Global Sports Cards
has enough excess capacity to handle the special order. Read the requirements
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.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 | (59,000 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 |
|
|
Decision:
Accept the special sales order.
Reject the special sales order.
Requirement 2. Now assume that the Hall of Fame wants special hologram baseball cards.
Global Sports Cards
must spend
$5,400
to develop this hologram, which will be useless after the special order is completed. Prepare an incremental analysis to determine whether
Global Sports Cards
should accept the special order under these circumstances. (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 | (59,000 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 |
|
|
Decision:
Reject the special sales order.
Accept the special sales order.
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