Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached International Cards with a special order. The Hall of Fame wishes to purchase 56,000 baseball card packs for a special promotional campaign and offers $0.43 per pack, a total of $24,080. International Cards' total production cost is $0.63 per pack, as follows:
Variable costs: ..................................................................................................
Direct materials ...................................................................................... $0.13
Direct labor ............................................................................................... 0.08
Variable overhead ..................................................................................... 0.12
Fixed overhead ......................................................................................... 0.30
Total cost ................................................................................................ $0.63
International Cards has enough excess capacity to handle the special order
Requirements
1. Prepare an incremental analysis to determine whether International Cards should accept the special sales order assuming fixed costs would not be affected by the special order.
2. Now assume that the Hall of Fame wants special hologram baseball cards. International Cards will spend $5,000 to develop this hologram, which will be useless after the special order is completed. Should International Cards accept the special order under these circumstances? Show your analysis.