Question

1. $5,600 Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Collector-Cards with a special order. The Hall of Fame wishes to purchase 56,000 baseball card packs for a special promotional campaign and offers $0.38 per pack, a total of $21,280. Collector-Cards total production cost is $0.58 per pack, as follows: Variable costs: Direct materials $ 0.11 Direct labor 0.09 Variable overhead 0.08 Fixed overhead 0.30 Total cost $ 0.58 Collector-Cards has enough excess capacity to handle the special order.. Requirements 1. Prepare a differential analysis to determine whether Collector-Cards should accept the special sales order. 2. Now assume that the Hall of Fame wants special hologram baseball cards. Collector-Cardz will spend $5,700 to develop this hologram, which will be useless after the special order is completed. Should Collector-Cardz accept the special order under these circumstances, assuming no change in the special pricing of $0.38 per pack

Answer 1

A. Collector Cards should accept the offer from Baseball Hall of Fame as it gives a profit of $5,600

(Note: in working the profit from this transaction the cost relating to Fixed Overhead should be ignored, as the firm had covered its Fixed Costs through its regular sales)

B. The hologram addition to the card should be rejected at $0.38 per card as it results in a loss of -$100. (Note: the special hologram material is specific to this order and will be useless after this order is satisfied, thus it completely wipes out the $5,600 profit we recorded in item A above)

Step-by-step explanation:

Please refer to the attached documents for detailed presentation of the answers