Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Star Hobby with a special order. The Hall of Fame wants to purchase $56,000$ baseball card packs for a special promotional campaign and offers $$0\mathrm{.}37$ per pack, a total of $$20,720.$ Star Hobby's total production cost is $$0\mathrm{.}57$ per pack, as follows:

View the cost information.

Star Hobby has enough excess capacity to handle the special order.

Read the requirements.

Requirements

Less variable expense associated with the order:

Variable manufacturing costs

$0\mathrm{.}32$

$\backslash$table$[[,17,920],[$$$,2,800],[,0],[$$$,2,800]]$

Now assume that the Hall of Fame wants special hologram baseball car Star Hobbylmust spend $$5,000$ to develop this hologram, which will be i after the special order is completed. Should Star Hobby accept the spec under these circumstances? Show your analysis.

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.

Requirement $2.$ Now assume that the Hall of Fame wants special hologram baseball cards. Star Hobby must spend $$5,000$ to develop this hologram, which will be useless after the special order is completed. Prepare an incremental analysis to determine whether Star Hobby 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.$)$

Incremental Analysis of Special Sales Order Decision

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

Get more help

Cost information

Variable costs:

Direct materials

$0\mathrm{.}13$

Direct labor

$0\mathrm{.}07$

Variable overhead

$0\mathrm{.}12$

Fixed overhead.

Total cost

Per Unit $(56,000$ units$)$

$\backslash$table$[[\backslash$table$[[$Variable costs:$],[$Direct materials$]],$$$,0\mathrm{.}13],[$Direct labor,,$0\mathrm{.}07],[$Variable overhead,,$0\mathrm{.}12],[$Fixed overhead. $.,,0\mathrm{.}25],[$Total cost$.,$$$,0\mathrm{.}57]]$