Problem 201A ThreePoint Sports Inc manufactures basketballs

Problem 20-1A ThreePoint Sports Inc. manufactures basketballs for the Women\'s National Basketball Association (WNBA). For the first 6 months of 2017, the company reported the following operating results while operating at 80% of plant capacity and producing 118,500 units. Sales Cost of goods sold Selling and administrative expenses Net income Amount $4,503,000 3,448,500 402,750 651,750 Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $225,000 In July, normally a slack manufacturing month, ThreePoint Sports receives a special order for 10,000 basketballs at $27 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.73 per unit because of shipping costs but would not increase fixed costs and expenses

Solution

Solution 1:

Solution b:

Special order should be accepted because there is an increase in net income of $37,700.

Computation of variable costs per unit
	Total	Fixed	Variable (Total -fixed)	Variabe cost per unit (Variable cost/ 118500)
Cost of Goods sold	$3,448,500.00	$960,000.00	$2,488,500.00	$21.00
Selling and Administrative expenses	$402,750.00	$225,000.00	$177,750.00	$1.50