Question

Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Hobby Memorabilia & More with a special order. The Hall of Fame wants to purchase 58,000 base-ball card packs for a special promotional campaign and offers $ 0.43 per pack, a total of $ 24,940. Hobby Memorabilia & More’s total production cost is $ 0.63 per pack, as follows:
Variable costs: Direct materials...........................................................................$ 0.14
Direct labor........................................................................................................... 0.08
Variable overhead................................................................................................. 0.11
Fixed overhead....................................................................................................... 0.30
Total cost.............................................................................................................. $ 0.63
Hobby Memorabilia & More has enough excess capacity to handle the special order.

Requirements
1. Prepare an incremental analysis to determine whether Hobby Memorabilia & More 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. Hobby Memorabilia & More must spend $ 5,500 to develop this hologram, which will be use-less after the special order is completed. Should Hobby Memorabilia & More accept the special order under these circumstances? Show your analysis.



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  • CreatedAugust 27, 2014
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