Special order decisions given two scenarios (Learning Objective 2) Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Collectible Cards with a special order. The Hall of Fame wants to purchase 57,000 baseball card packs for a special promotional campaign and offers $0.40 per pack, a total of $22,800. Collectible Cards' total production cost is $0.60 per pack, as follows:
| Variable costs: |
|
| Direct materials |
$0.13 |
| Direct labor |
0.06 |
| Variable overhead |
0.11 |
| Fixed overhead |
0.30 |
| Total cost |
$0.60 |
Collectible Cards has enough excess capacity to handle the special order.
1. Prepare an incremental analysis to determine whether Collectible Cards 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. Collectible Cards must spend $5,000 to develop this hologram, which will be useless after the special order is completed. Should Collectible Cards accept the special order under these circumstances? Show your analysis.