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 $5,232,600 $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 $ By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor.

Answer 1

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