Question

Pro Sports Inc. manufactures basketballs for professional basketball associations. For the first six months of 2020, the company reported the following operating results while operating at 90% of plant capacity: Amount Per Unit Sales $5,616,000 $52.00 Cost of goods sold 3,672,000 34.00 Selling and administrative expenses 486,000 4.50 Net income $1,458,000 $13.50 Fixed costs for the period were cost of goods sold of $1,080,000, and selling and administrative expenses of $194,400. In July, normally a slack manufacturing month, Pro Sports receives a special order for 10,800 basketballs at $32 each from the Italian Basketball Association. Accepting the order would increase variable selling and administrative expenses by $0.50 per unit because of shipping costs, but it would not increase fixed costs and expenses.

Answer 1