Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Hungry-Cardz with a...
Question:
Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Hungry-Cardz with a special order. The Hall of Fame wishes to purchase 55,000 baseball card packs for a special promotional campaign and offers $0.33 per pack, a total of $18,150. Hungry-Cardz's total production cost is $0.53 per pack, as follows:
| Variable costs: | |
|---|---|
| Direct materials | $0.13 |
| Direct labor | 0.04 |
| Variable overhead | 0.11 |
| Fixed overhead | 0.25 |
| Total cost | $0.53 |
Hungry-Cardz has enough excess capacity to handle the special order.
Prepare a differential analysis to determine whether Hungry-Cardz should accept the special sales order.
Now assume that the Hall of Fame wants special hologram baseball cards. Hungry-Cardz will spend $5,000 to develop this hologram, which will be useless after the special order is completed. Should Hungry-Cardz accept the special order under these circumstances, assuming no change in the special pricing of $0.33 per pack?
Incremental Analysis (Relevant Costing):
In relevant costing, incremental analysis is a costing analysis in which the management analyze when to accept or reject any order from customers. This is a good management tool used to analyze what order is profitable and advantageous.
Answer and Explanation: 1
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View this answerPrepare a differential analysis to determine whether Hungry-Cardz should accept the special sales order.
| Expected increase in revenue ( 55,000 packs... |
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