Question

ThreePoint Sports Inc. manufactures basketballs for the Women’s National Basketball Association (WNBA). For the first 6 months of 2020, the company reported the following operating results while operating at 80% of plant capacity and producing 119,500 units.

		Amount
Sales		$4,660,500
Cost of goods sold		3,675,040
Selling and administrative expenses		516,825
Net income		$468,635

Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $236,000.

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 $0.77 per unit because of shipping costs but would not increase fixed costs and expenses.

Partially correct answer iconYour answer is partially correct.

(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		$		$		$

(b) Should ThreePoint Sports Inc. accept the special order?

  

What is the minimum selling price on the special order to produce net income of $5.15 per ball? (Round answer to 2 decimal places, e.g. 15.25.)

Minimum selling price

$ ?

Answer 1

let me know if you need any clarification..

ans a)
		Reject order	Accept order	Net Income Increase (Decrease)
	Sales	$4,660,500	$4,930,500	$270,000
	Cost of goods sold	3,675,040	3902240	-227,200
	Selling and administrative expenses	516,825	548025	-31,200
	Net income	$468,635	$480,235	11,600
	variable cost per unit			Per unit
	Cost of goods sold	=(3675040-960000)/119500		22.72
	Selling and administrative expenses	=(516825-236000)/119500		2.35
	COGS if order accepted	=(3675040+10000*22.72
	Selling and admi if order accepted	=(516825+10000*2.35+10000*.77
ans b)
	Since net income will incresae by 11600 therefore order should be accepted
ans c)
	Special order variable cost per unit = 22.72+2.35+0.77			25.84
	Profit required per unit=			5.15
	required sales price			30.99
	therefore answer =			30.99