Question

Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached World Wide Cards with a special order. The Hall of Fame wants to purchase 56,000 baseball card packs for a special promotional campaign and offers $0.36 per pack, a total of $20,160. World Wide Cards's total production cost is $0.56 per pack, as follows: : (Click the icon to view the cost information.) World Wide Cards has enough excess capacity to handle the special order. Read the requirements. Requirement 1. Prepare an incremental analysis to determine whether World Wide Cards should accept the special sales order assuming fixed costs would not be affected by the special order. (Enter a "0" for any zero balances. Use parentheses or a minus sign to indicate a decrease in operating income from the special order.) Total Order (56,000 units) Incremental Analysis of Special Sales Order Decision Per Unit Revenue from special order Less variable expense associated with the order: Variable manufacturing costs Contribution margin

Answer 1

Variable manufacturing cost	0.31	=0.13+0.07+0.11
1
	Per unit	Total order (56,000 units)
Revenue from special order	0.36	20160
Less: variable expenses associated with the order
Variable manufacturing cost	0.31	17360
Contribution margin	0.05	2800
Less: Additional fixed expenses associated with the order		0
Increase(decrease) in operating income from the special order		2800
Accept the special order
2
	Per unit	Total order (56,000 units)
Revenue from special order	0.36	20160
Less: variable expenses associated with the order
Variable manufacturing cost	0.31	17360
Contribution margin	0.05	2800
Less: Additional fixed expenses associated with the order		5300
Increase(decrease) in operating income from the special order		-2500
Do not accept the special order