Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Hungry Cardz with a special order. The Hall of Fame wishes to purchase 55,000 baseball card packs for a special promotional campaign and offers $0.33 per pack, a total of $18,150. Hungry-Cardz’s total production cost is $0.53 per pack, as follows:
Variable costs:
Direct materials....................................$ 0.13
Direct labor.......................................... 0.04
Variable overhead................................ 0.11
Fixed overhead.................................... 0.25
Total cost.............................................$ 0.53
Hungry-Cardz has enough excess capacity to handle the special order.
Requirements
1. Prepare a differential analysis to determine whether Hungry-Cardz should accept the special sales order.
2. Now assume that the Hall of Fame wants special hologram baseball cards. Hungry Cardz will spend $5,000 to develop this hologram, which will be useless after the special order is completed. Should Hungry-Cardz accept the special order under these circumstances, assuming no change in the special pricing of $0.33 per pack?