Question

In: Accounting

ThreePoint Sports Inc. manufactures basketballs for the Women’s National Basketball Association (WNBA). For the first 6...

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 120,300 units.

Amount
Sales $4,571,400
Cost of goods sold 3,713,667
Selling and administrative expenses 534,893
Net income $322,840


Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $257,000.

In July, normally a slack manufacturing month, ThreePoint Sports receives a special order for 10,000 basketballs at $28 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 $enter revenues in dollars $enter revenues in dollars $enter revenues in dollars
Cost of goods sold enter the cost of goods sold in dollars enter the cost of goods sold in dollars enter the cost of goods sold in dollars
Selling and administrative expenses enter selling and administrative expenses in dollars enter selling and administrative expenses in dollars enter selling and administrative expenses in dollars
Net income $enter net income in dollars $enter net income in dollars $enter net income in dollars



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

select between Yes and No                                                                      NoYes

Solutions

Expert Solution

Reject Order Accept Order Net Income Increase (Decrease)
(a) Revenues                   -              280,000                                            280,000
Cost of goods sold                   -              228,900                                          (228,900)
($3,713,667 - $960,000) x 10,000/120,300
Selling and administrative expenses                   -                30,600                                            (30,600)
(($534,893 - $257,000)/120,300 + $0.75) x 10,000
Net Income                   -                20,500                                             20,500
(b) Yes

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