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.

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?

  • CreatedJanuary 16, 2015
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