E25-10 Making special pricing

timer Asked: Dec 21st, 2015

Question description

E25-10 Making special pricing decisionsSuppose the Baseball Hall of Fame in Cooperstown, New York, has approachedHobby-Cardz with a special order. The Hall of Fame wishes to purchase 57,000baseball card packs for a special promotional campaign and offers $0.41 per pack, atotal of $23,370. Hobby-Cardz’s total production cost is $0.61 per pack, as follows:Variable costs:Direct materials $ 0.13Direct labor 0.06Variable overhead 0.12Fixed overhead 0.30Total cost $ 0.61Hobby-Cardz has enough excess capacity to handle the special order.Requirements1. Prepare a differential analysis to determine whether Hobby-Cardz should acceptthe 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 uselessafter the special order is completed. Should Hobby-Cardz accept the specialorder under these circumstances, assuming no change in the special pricing of$0.41 per pack?

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