Solved by verified expert :Problem
#1. Making special pricing decisions
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 useless 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 per
pack?
