Posted: April 19th, 2016
Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Active-Cardz with a special order. The Hall of Fame wishes to purchase 50,000 base-ball card packs for a special promotional campaign and offers $0.37 per pack, a total of $18,500. Active-Cardz’s total production cost is $0.57 per pack, as follows:
Direct Materials $0.14
Direct Labor 0.07
Variable Overhead 0.11
Fixed Overhead 0.25
Total Cost $0.57
Active-Cardz has enough excess capacity to handle the special order.
1. Prepare an incremental analysis to determine whether Active-Cardz should accept the special sales order.
2. Now assume that the Hall of Fame wants special hologram baseball cards. Active-Cardz will spend $5,800 to develop this hologram, which will be useless after the special order is completed. Should Active-Cardz accept the special order under these circumstances?
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