Suppose the Hockey Hall of Fame in Toronto has approached Active-Cardz with a special order. The Hall of Fame wants to purchase 58,000 hockey card packs for a special promotional campaign and offers $0.39 perpack, a total of $22,620. Active-Cardz's total production cost is $0.53 perpack, asfollows:

Active-Cardz has enough excess capacity to handle the special order.

Requirement 1. Prepare an incremental analysis to determine whether Active-Cardz should accept the special sales order assuming fixed costs would not be affected by the special order.

Incremental Analysis of Special Sales Order

Expected increase in revenues

Expected increase in expenses:

Variable manufacturing costs

Fixed manufacturing costs

Total expected increase in expenses

Expected increase (decrease) in operating income

Active-Cardz should

accept

reject

the special sales order because the operating income is expected to

stay the same.

increase.

decrease.

Requirement 2. Now assume that the Hall of Fame wants special hologram hockey cards. Active-Cardz must spend $2,200 to develop thishologram, which will be useless after the special order is completed. Prepare an incremental analysis to determine whether Active-Cardz should accept the special order under these circumstances

Incremental Analysis of Special Sales Order

Expected increase in revenues

Expected increase in expenses:

Variable manufacturing costs

Fixed manufacturing costs

Total expected increase in expenses

Expected increase (decrease) in operating income

Active-Cardz should

accept

reject

the special sales order under these circumstances because the operating income is expected t