Question

Suppose the Baseball Hall of Fame in? Cooperstown, New? York, has approached Rec?Cardz with a special order. The Hall of Fame wishes to purchase 57,000 baseball card packs for a special promotional campaign and offers $ 0.36 per? pack, a total of $20,520.

Rec?Cardz?'s total production cost is $ 0.56 per? pack, as? follows:

Variable costs:

Direct materials

$0.12

Direct labor

0.09

Variable overhead

0.10

Fixed overhead

0.25

Total cost

$0.56

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

1.	Prepare a differential analysis to determine whether Rec- Cardz should accept the special sales order.
2.	Now assume that the Hall of Fame wants special hologram baseball cards. Rec?Cardz will spend $5,300 to develop this? hologram, which will be useless after the special order is completed. Should Rec?Cardz accept the special order under these? circumstances, assuming no change in the special pricing of $0.36 per? pack?

Requirement 1. Prepare a differential analysis to determine whether Rec?Cardz should accept the special sales order. ?(Enter decreases to profits with a parentheses or minus? sign.)

	Expected increase in revenues
	Expected increase in expenses
	Variable manufacturing cost:
			packs x
	Expected		in operating income

Answer 1