Question

In: Accounting

Problem 20-1A (Part Level Submission) ThreePoint Sports Inc. manufactures basketballs for the Women’s National Basketball Association...

Problem 20-1A (Part Level Submission)

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 119,900 units.
Amount
Sales $4,676,100
Cost of goods sold 3,527,059
Selling and administrative expenses 482,601
Net income $666,440

Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $244,000.

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 $0.73 per unit because of shipping costs but would not increase fixed costs and expenses.

(a) & (b)

Your answer is partially correct. Try again.
(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 $

0

$

290,000

$

290,000

Cost of goods sold

0

Selling and administrative expenses

0

Net income $

0

$ $


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

Yes

Solutions

Expert Solution

Answer

Reject order

Accept order Net income increase(decrease)
Revenues 0 $                         290,000 $                                        290,000
Cost of goods sold 0 $                         214,100 -$                                       214,100
Selling and administrative expenses 0 $                           27,200 -$                                         27,200
Net income 0 $                           48,700 $                                          48,700
b
Minimum selling price 29.4 29.4
Workings:
Per unit:
Cost of goods sold 21.41 (3527059-960000)/119900
Selling and administrative expenses 1.99 (482601-244000)/119900
Cost of goods sold 214100 10000*21.41
Selling and administrative expenses 27200 10000*(1.99+0.73)

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