Problem #1. Making special pricing decisions_Hall of Fame in Cooperstown

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Description

Problem
#1. Making special pricing decisions

Suppose
the Baseball Hall of Fame in Cooperstown, New York, has approached Hobby-Cardz
with a special order. The Hall of Fame wishes to purchase 57,000 baseball card
packs for a special promotional campaign and offers $0.41 per pack, a total of
$23,370. Hobby-Cardz’s total production cost is $0.61 per pack, as follows:

Variable costs:

Direct materials $ 0.13

Direct labor 0.06

Variable overhead 0.12

Fixed overhead 0.30

Total cost $ 0.61

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

Requirements

1.
Prepare a differential analysis to determine whether Hobby-Cardz should accept the
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 useless after the
special order is completed. Should Hobby-Cardz accept the special order under
these circumstances, assuming no change in the special pricing of $0.41 per
pack?

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Problem #1. Making special pricing decisions_Hall of Fame in Cooperstown

$6.00

Description

Problem
#1. Making special pricing decisions

Suppose
the Baseball Hall of Fame in Cooperstown, New York, has approached Hobby-Cardz
with a special order. The Hall of Fame wishes to purchase 57,000 baseball card
packs for a special promotional campaign and offers $0.41 per pack, a total of
$23,370. Hobby-Cardz’s total production cost is $0.61 per pack, as follows:

Variable costs:

Direct materials $ 0.13

Direct labor 0.06

Variable overhead 0.12

Fixed overhead 0.30

Total cost $ 0.61

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

Requirements

1.
Prepare a differential analysis to determine whether Hobby-Cardz should accept the
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 useless after the
special order is completed. Should Hobby-Cardz accept the special order under
these circumstances, assuming no change in the special pricing of $0.41 per
pack?

Reviews

There are no reviews yet.

Be the first to review “Problem #1. Making special pricing decisions_Hall of Fame in Cooperstown”

Your email address will not be published. Required fields are marked *