BallCards Inc. sells baseball cards in packs of 15 in drugstores throughout the country. It is the

Question:

BallCards Inc. sells baseball cards in packs of 15 in drugstores throughout the country. It is the third leading firm in the industry. BallCards has been approached by Pennock Cereal Inc., which would like to order a special edition of cards to use as a promotion with its cereal. BallCards would be solely responsible for designing and producing the cards. Pennock wants to order 25,000 sets and has offered $23,750 for the total order. Each set will consist of 33 cards. Ball-Cards currently produces cards in sheets of 132.

Production, marketing, and other costs (per sheet)

Direct materials ...............$ 1.20

Direct labor .................. 0.20

Variable overhead .............. 0.40

Fixed overhead ............... 0.15

Variable marketing ............... 0.10

Fixed marketing ................ 0.35

Insurance, taxes, and administrative salaries ..... 0.10

Costs for special order

Design .................. 2,000

Other setup costs .............. 5,500

BallCards would incur no marketing costs for the special order. It has the capacity to accept this order without interrupting regular production.