ThreePoint Sports Inc manufactures basketballs for the Women

ThreePoint Sports Inc. manufactures basketballs for the Women\'s National Basketball Association (WNBA). For the tirst 6 months of 2017, the company reported the following operating results while operating at 80% of plant capacity and producing 119,700 units. Sales Cost of goods sold Selling and administrative expenses Net income Amount 54,788,000 3,559,884 468,445 5759,671 Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $247,000. In July, normally a slack manufacturing month, ThreePoint Sports receives a special order for 10,000 basketballs at $29 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.75 per unit because of shipping costs but would not increase fixed costs and expenses. (a) Prepare an incremental analysis for the special order. (Round all per unit computations to 2 decimal places, e.g. 15.25. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Reject Order Accept Order Net Income Increase (Decrease) Revenues Cost of goods sold Selling and administrative expenses Net income 468445 (b) Should ThreePoint Sports Inc. accept the special order?

Solution

Incremental analysis: Reject Accept Net Income Orderr Order Increase/(Decrease) Revenue 0 290000 290,000 Cost of Goods sold 0 217200 -217200 Selling and admin expense 0 26000 -26000 Net income 0 46800 46800 Yes, the order shall be accepted Note: Cost of goods sold per unit: (3559884-960000)/119700 =21.72 perr unit Selling and admin OH = (468445-247000)/119700 = 1.85 perr unit Selling and admin OH for special order: 1.85+0.75 = 2.60 pr unit Req c: Cost of Goods sold per unit 21.72 Selling and distribution per unit 2.6 Add: Desired profit per unit 5.09 Minimum Selling price 29.41