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Pro Sports Inc. manufactures basketballs for professional basketball associations. For the first six months of 2020,...

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 $5,232,600 $51.00
Cost of goods sold 3,591,000 35.00
Selling and administrative expenses 451,440 4.40
Net income $1,190,160 $11.60

Fixed costs for the period were cost of goods sold of $1,026,000, and selling and administrative expenses of $184,680.

In July, normally a slack manufacturing month, Pro Sports receives a special order for 10,260 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.

(a)

Prepare an incremental analysis for the special order. (Round per unit calculations to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 125.)
Incremental revenue $
Incremental cost:
   Variable COGS    $
   Variable S & A    
   Additional S & A
Incremental income $
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Solutions

Expert Solution

Answer-a)-

PRO SPORTS INC.
INCREMENTAL ANALYSIS FOR SPECIAL ORDER
PARTICULARS AMOUNT
$
Incremental revneue 10260 units*$32 per unit 328320
Less-Incremental costs
Variable cost of goods sold 10260 units*$25 per unit 256500
Variable selling & administrative expenses 10260 units*$2.6 per unit 26676
Additional variable selling & administrative expenses 10260 units*$0.50 per unit 5130
Incremental income 40014

Explanation-Variable cost of goods sold per unit=(Total cost of goods sold-Fixed cost of goods sold)/Number of units sold

= ($3591000-$1026000)/102600 units

= $2565000/102600 units

= 25 per unit

Variable selling and administrative expenses per unit=(Total selling and administrative expenses -Fixed selling and administrative expenses)/Number of units sold

= ($451440-$184680)/102600 units

= $266760/102600 units

= $2.6 per unit

Where- No. of units sold = Total sales value/ Selling price per unit

= $5232600/$51 per unit

= 102600 units


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