Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Active-Cardz with a special order. The Hall of Fame wishes to purchase 50,000 base-ball card packs for a special promotional campaign and offers $0.37 per pack, a total of $18,500. Active-Cardz's total production cost is $0.57 per pack, as follows:
Direct Materials $0.14
Direct Labor 0.07
Variable Overhead 0.11
Fixed Overhead 0.25
Total Cost $0.57
Active-Cardz has enough excess capacity to handle the special order.
1. Prepare an incremental analysis to determine whether Active-Cardz should accept the special sales order.
2. Now assume that the Hall of Fame wants special hologram baseball cards. Active-Cardz will spend $5,800 to develop this hologram, which will be useless after the special order is completed. Should Active-Cardz accept the special order under these circumstances?
Please see attached for the full question set.
Your tutorial shows you the special order strategy and creates a contribution margin income ...
Your tutorial shows you the special order strategy and creates a contribution margin income statement in reverse, starting with profits and working back to sales. Then, the markup percent can be created from the various cost bases. The missing pieces is solved by sequential solutions starting with prime costs. See excel attached. Each problem is a separate tab. Click in cells to see computation.