Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Hobby- Cardz with a special
Question:
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
Total cost ...........$ 0.61
Hobby- Cardz has enough excess capacity to handle the special order.
Requirements
1. Prepare a differential 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 use-less after the special order is completed. Should Hobby- Cardz accept the special order under these circumstances, assuming no change in the special pricing of $ 0.41 perpack?
Step by Step Answer:
Horngrens Financial and Managerial Accounting
ISBN: 978-0133255584
4th Edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura