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Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Hobby-Cardz with a special order. The Hall of Fame wishes to purchase 57,000 baseball card packs for a special promotional campaign and offers $0.41 per pack, a total of $23,370. Hobby-Cardz€™s total production cost is $0.61 per pack, as follows:
Variable costs: Direct materials $ 0.13 Direct labor 0.06 Variable overhead 0.12 Fixed overhead 0.30 $ 0.61 Total cost
Hobby-Cardz has enough excess capacity to handle the special order.
Requirements
1. Prepare an incremental analysis to determine whether Hobby-Cardz should accept the special sales order.
2. Now assume that the Hall of Fame wants special hologram baseball cards. Hobby-Cardz will spend $5,900 to develop this hologram, which will be useless after the special order is completed. Should Hobby-Cardz accept the special order under thesecircumstances?
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