Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Collectibles & More with a special order. The Hall of Fame wants to purchase 53,000 baseball card packs for a special promotional campaign and offers $0.32 per pack, a total of $16,960. Collectibles & More's total production cost is $0.52 per pack, as follows:
Variable costs:
Direct materials .................................................................................... $0.11
Direct labor ............................................................................................ 0.06
Variable overhead .................................................................................. 0.10
Fixed overhead ...................................................................................... 0.25
Total cost ............................................................................................. $0.52
Collectibles & More has enough excess capacity to handle the special order.
Requirements
1. Prepare an incremental analysis to determine whether Collectibles & 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. Collectibles & More must spend $5,100 to develop this hologram, which will be useless after the special order is completed. Should Collectibles & More accept the special order under these circumstances? Show your analysis.