Question

PinaColada 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, PinaColada 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.

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 $ $ $ Cost of goods sold Selling and administrative expenses Net income $ $ $

Answer 1

Incremental analysis
			Reject	Accept	Net Income
					Increase/Decrease
Revenues			4571400	4851400	280000
Cost of goods sold		-3713667	-3942567	-228900
Selling and admin expense	-534893	-565493	-30600
Net Income		322840	343340	20500
Note:
Incremental cost of goods sold for special order:
Variable cost of goods sold for 120300 units (3713667-960000)	2753667
Divide: Units					120300
Variable cost of goods sold per unit			22.89
Incremental cost of goods sold for special order:		228900
			(10000*22.89)
Incremental Selling and admin expense for special order:
Variable selling admin expense (534893-257000)		277893
Divide: Units					120300
Variable selling admin expenses per unit			2.31
Variable cost per unit for special order (2.31+0.75)		3.06
Incremental Selling and admin expense for special order:	30600