Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Wartum-Card with a special order. The Hall of Fame Wantum - Carde's total production cost is $0.48 per pack, as follows wishes to purchase 50,000 baseball card packs for a special promotional campaign and offers $0.28 per pack, a total of $14.000 Click the icon to view the cost information) Wantum-Carde has enough excess capacity to handle the special order Read the requirements Requirement 1. Prepare a differential analysis to determine whether Wantum - Cardz should scept the special sales order (Enter decreases to profits with a parentheses or minus sign) Expected increase in revenues Data Table Expected increase in expenses Variable manufacturing cost packs Variable costs Expected in operating income Direct materials $ 0.09 Direct labor 0.06 Variable overhead 0.08 025 Find overhead 0.48 Total cost Print Done Requirements 1. Prepare a differential analysis to determine whether Wartum-Carde should accept the special sales order 2. Now assume that the Hall of Fame wants special hologram baseball cards Wantum - Carde wil spend $5,000 to develop this hologram, which will be useless after the special order is completed. Should Wartum - Carde scoop the special order under these circumstances, assuming no change in the special pricing of $028 per pack? Print Done use for en stor enter a number in the input fields and then click Check Ans Requirement 1. Prepare a differential analysis to determine whether Hero - Cardz should accept the special sales order. A common approach to making special sales order decisions is called differential analysis. In this approach, the emphasis is on the difference in operating income between the alternative approaches. Differential analysis is also sometimes called incremental analysis. Instead of looking at the company's entire income statement under each decision alternative, we just look at how operating income would differ under each alternative. Using this approach, we leave out irrelevant information--the costs and revenues that will not differ between alternatives The number of packs required by the special order, 58,000, and the expected increase in revenue from the special order, $24,940, which was given to us in the information provided has been entered into the analysis for you. The next step in completing the analysis is computing the increase in expenses from the special order. Recall that fixed costs are unavoidable, so to compute the differential increase in expenses we are only calculating the increase in variable costs. Use the variable cost information provided to compute the total variable cost per unit amount needed to complete the calculation below. (Enter decreases to profits with a parentheses or minus sign) Expected increase in revenue $ 24,940 Expected increase in expenses Variable manufacturing cost: (22.040) 58,000 packs $ 0.38 Next label and calculate the expected increase or decrease in operating income on the differential analysis. Remember, if the expected increase in revenues from the special order exceeds the expected increase in differential costs from the special order, the company's overall income is expected to increase. If the expected increase in revenues from the special order is less than the expected increase in differential costs from the special order, the company's overall income is expected to decrease. (Enter decreases to profits with a parentheses or minus sign) Expected increase in revenues-Sale of 58.000 packs * $ 0.43 $ 24,940 Expected increase in expenses Variable manufacturing cost: 58,000 packs * $ 0.38 (22,040) Expected increase in operating income $ 2,900 Carefully review the table below for to determine if Hero - Cardz should accept or reject the special order. Requirement 2. Now assume that the Hall of Fame wants special hologram baseball cards, Hero - Cardz will spend $5,300 to develop this hologram, which will be useless after the special order is completed. Should Hero - Cardz accept the special order under these circumstances, assuming no change in the special pricing of $0.43 per pack? Start by preparing the differential analysis with the additional cost for the special hologram. Recall that in requirement 1, the differential cost of filling the order was the additional variable costs (not fixed costs, since those costs will be incurred regardless of whether the special order is accepted) to fill the order. Now for requirement 2, the differential costs include both the additional variable costs and the cost required to develop the hologram program. Therefore, the main difference between the new analysis (which includes the special hologram) and the analysis from requirement 1, is the additional fixed costs that will be incurred by Hero - Cardz to develop the hologram. Let's start by adding this amount into the analysis below and computing the new total expected increase in expenses amount. (Enter decreases to profits with a parentheses or minus sign.) Expected increase in revenues-Sale of 58,000 packs $ 0.43 $ 24,940 Expected increase in expenses: Variable manufacturing cost: 58,000 packs x (22,040) Fixed manufacturing costs (5,300) (27,340) 0.38 $ Expected increase in total expenses Now label and calculate the expected increase or decrease in operating income. Once again, if the expected increase in revenues from the special order exceeds the expected increase in differential costs from the special order, the company's overall income is expected to increase. If the expected increase in revenues from the special order is less than the expected increase in differential costs from the special order, the company's overall income is expected to decreaso. (Use parentheses or a minus sign for an operating loss.) Expected increase in revenues-Sale of 58,000 packs $ 0.43 $ 24,940 Expected increase in expenses: Variable manufacturing cost: 58,000 packs $ (22,040) Fixed manufacturing costs (5,300) Expected increase in total expenses (27,340) Expected decrease in operating income (2,400) Use the decision rule table again to determine if this special order for the hologram baseball cards should be accepted or rejected by Hero - Cardz 0.38 $ no Con Nous contion margincome tante month anded 31. 2018. The following the icon to view the coloration) Supported by 100 mil tour and person The Fundacio manufacture the additional is boards wederst und Manufacturing Conte Requirement 2. Prepare an der whether should the words Income For the Money 31.000 40.000 1 3.000 200.000 1 yeach cost in the income as the relevant into Seting and Administrative Total Variable Cole Contribution Mergin FC Manufacturing Soling and Annie 127.000 100 1. eryone actors found onder deciding whether to 18.00 ering home Pin Dere Help Me Solve This Question Help Aqua Fun manufactures flotation vests in Charleston, South Suppose Overboard wishes to buy 3,800 vests from Aqua Fun. Carolina. Aqua Fun's contribution margin income statement for the Aqua Fun will not incur any variable selling and administrative month ended July 31, 2018, contains the following data: expenses on the special order. The Aqua Fun plant has enough Click the icon to view the cost information.) unused capacity to manufacture the additional vests. Overboard has offered $9 per vest, which is below the normal sales price of Read the requirements $16. Requirement 1. Identify each cost in the income statement as either relevant or irrelevant to Aqua Fun's decision. Relevant information is expected future data that differs among alternatives. Relevant costs are costs that will affect Aqua Fun's decision to accept or reject the special order. Irrelevant costs are costs that do not affect a decision. Carefully review the cost categories as seen in Aqua Fun's income statement and consider which costs are relevant to this decision. Variable selling and administrative costs will remain the same because no special efforts were made to get this sale. Fixed costs are unchanged because Aqua Fun has enough unused capacity to produce more vests without adding more facilities. Variable manufacturing costs will, however, change, if the company accepts the special order since these are the costs that the company must incur to produce the additional vests. Requirement 2. Prepare a differential analysis to determine whether Aqua Fun should accept this special sales order. A common approach to making short-term business decisions is called differential analysis. In this approach, the emphasis is on the difference in operating income between the alternative approaches. Differential analysis is also sometimes called incremental analysis. Instead of looking at the company's entire income statement under each decision alternative, we just look at how operating income woulc differ under each alternative. Using this approach, we leave out irrelevant informationthe revenues and costs that will not differ between alternatives. Let's start by calculating the expected increase in revenues as a result of this special order. Remember to use the amount that Optimum is offering to pay for the vests when calculating the increase in revenues. Sales price per unit x Special order units Expected increase in sales from special order 4,100 32,800 Help Me Solve This Question Help Aqua Fun manufactures flotation vests in Charleston, South Suppose Overboard wishes to buy 3,800 vests from Aqua Fun. Carolina. Aqua Fun's contribution margin income statement for the Aqua Fun will not incur any variable selling and administrative month ended July 31, 2018, contains the following data: expenses on the special order. The Aqua Fun plant has enough Click the icon to view the cost information.) unused capacity to manufacture the additional vests. Overboard has offered $9 per vest, which is below the normal sales price of Read the requirements $16. Our analysis of costs will include only the variable manufacturing costs, as they are the only additional costs that will be incurred by accepting the special order. In order to compute the increase in variable manufacturing costs as a result of accepting the order, we must first determine the variable manufacturing cost of producing each vest. We can do this by using the information provided in the contribution margin income statement data. Refer to the information provided and complete the calculation below to determine the variable manufacturing expense per vest. Variable manufacturing costs 1 Sales in units Variable manufacturing cost per unit 93,000 31,000 3 Now calculate the expected increase in variable manufacturing costs using the unit cost we calculated in the previous step. Expected increase in variable Variable manufacturing cost per unit * Special order units - manufacturing costs from special order 4.100 12,300 Now complete the differential analysis to determine whether Aqua Fun should accork this special sales order. Label and calculate the increase or decrease in operating income. Remember, if the increase in revenues exceeds the increase in expenses, it will be expected that the company will have an increase in operating income as a result of accepting the special sales order. If the increase in revenues is less than the increase in expenses, it will be expected that the company will see a decrease in operating income as a result of accepting the special sales order. (Enter decreases to profits with a parentheses or minus sian.) $ X had met DA incarert anewere $ Expected increase in revenue 32,800 Expected increase in variable manufacturing costs (12,300) Expected increase in operating income $ 20,500 Carefully review the results of the incremental analysis you prepared above and the decision rule below to determine whether Aqua Fun should accept or reject the special sales order. DECISION RULE: Accept special pricing order? If the expected increase in revenues exceeds the expected increase in variable and fixed costs: If the expected increase in revenues is less than the expected increase in variable and fixed costs: Accept the special pricing order Reject the special pricing order Requirement 3. Identify long-term factors Aqua Fun should consider in deciding whether to accept the special sales order. Managers need to consider whether the special order will affect regular sales in the long run. Will regular customers find out about the special order and demand a lower price or take their business elsewhere? Will the special order customer come back again and again, asking for the same reduced price? Will the special order price start a price war with competitors? Managers should determine that the answers to these questions are "no" or consider how customers will respond before accepting a special sales order. Managers may decide that any profit from the special order is not worth these risks. 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