Making special pricing decisionsSuppose the Baseball Hall of Fame in Cooperstown, New York, has approached Collector-Cardz 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-Cardz’s total production cost is $0.58 per pack, as follows:Collector-Cardz has enough excess capacity to handle the special order.RequirementsPrepare a differential analysis to determine whether Collector—Cardz should accept the special sales order.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? Variable costs:Direct materials$0.11Direct labor0.09Variable overhead0.08Fixed overhead0.30Total cost$0.58

Answered: Variable costs: Direct materials $0.11…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Making special pricing decisions

Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Collector-Cardz 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-Cardz’s total production cost is $0.58 per pack, as follows:

Collector-Cardz has enough excess capacity to handle the special order.

Requirements

Prepare a differential analysis to determine whether Collector—Cardz should accept the special sales order.
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?

Variable costs:
Direct materials
$0.11
Direct labor
0.09
Variable overhead
0.08
Fixed overhead
0.30
Total cost
$0.58

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