Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Sports-Cardz, Inc., with a special order. The Hall of Fame wishes to purchase 50,000 baseball card packs for a special promotional campaign and offers $0.40 per pack, a total of $20,000. Sports-Cardz's, total production cost is $0.60 per pack, as follows:
- Variable costs:
- Direct materials $0.14
- Direct labor 0.08
- Variable overhead 0.13
- Fixed overhead 0.25
- Total cost $0.60
Sports Cardz has enough excess capacity to handle the special order.
a.Prepare an incremental analysis to determine whether Sports Cardz should except the special sales order.
b.Now assume that the Hall of Fame wants special hologram baseball cards. Sports-Cardz will spend $5,000 to develop this holgram, which will be useless after the special order is completed. Should Sports-Cardz accept the special order under these circumstances?