Question
In: Accounting
Pro Sports Inc. manufactures basketballs for professional basketball associations. For the first six months of 2016,...
Pro Sports Inc. manufactures basketballs for professional basketball associations. For the first six months of 2016, the company reported the following operating results while operating at 90% of plant capacity:
Amount Sales $4,500.00 at $50.00 per unit
Cost of goods sold 3,150,000 at $35.00 per unit
Selling and administrative expenses 360,000 at $4.00 per unit
Net income 990,000 at $11.00 per unit
Fixed costs for the period were: cost of goods sold $900,000, and
selling and administrative expenses $162,000.
In July, normally a slack manufacturing month, Pro Sports receives
a special order for 9,000 basketballs at $30 each from the Italian
Basketball Association. Accepting the order would increase variable
selling and adminstrative expenses $0.50 per unit because of
shipping costs but would not increase fixed costs and expenses.
Instructions:
a) Prepare an incremental analysis for the special order.
b) Should Pro Sports Inc. accept the special order? Explain your
anser.
c) What is the minimum selling price on the special order to
produce net income of $5.00 per ball?
d) What nonfinancial factors should management consider in making
its decision?
Solutions
Expert Solution
a)
| Units produced = 4,500,000/ 50 = 90000 units | |||||
| Particulars | Total | Fixed | Variable | VC / unit (Cost / 90000) |
|
| Cost of goods sold | 3,150,000 | 900,000 | 2,250,000 | 25.00 | |
| Selling and admin | 360,000 | 162,000 | 198,000 | 2.20 | |
| Incremental cost / unit = Variable COGS / unit + Selling and admin / unit = 25 + 2.2 + 0.5 = 27.7 | |||||
b) Yes, Pro sports should accept the offer, as incremental cost is $27.7 whereas revenue will be $30 each unit. This will lead to $2.3 of extra contribution.
c) The minimum selling price to produce a net income of $ 5 = Inc cost + $5 = 27.7 + 5 = 32.7
d) The management needs to consider the production capacity, payment terms with the customer, credibility of the customer, etc.
ekkarill92 answered 1 year agoRelated Solutions
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
$5,616,000
$52.00
Cost of goods sold
3,672,000
34.00
Selling and administrative expenses
486,000
4.50
Net income
$1,458,000
$13.50
Fixed costs for the period were cost of goods sold of $1,080,000,
and selling and administrative expenses of $194,400.
In July, normally a slack manufacturing month, Pro Sports...
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...
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 118,800 units.
Amount
Sales
$4,514,400
Cost of goods sold
3,560,532
Selling and administrative expenses
468,164
Net income
$485,704
Fixed costs for the period were cost of goods sold $960,000, and
selling and administrative expenses $227,000.
In July, normally a slack manufacturing month, ThreePoint Sports
receives...
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...
Bramble Sports Inc. manufactures basketballs for the Women’s National Basketball Association (WNBA). For the first 6...
Bramble 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 119,700
units.
Amount
Sales
$4,788,000
Cost of goods sold
3,559,884
Selling and administrative expenses
468,445
Net income
$759,671
Fixed costs for the period were cost of goods sold $960,000, and
selling and administrative expenses $247,000.
In July, normally a slack manufacturing month, Bramble Sports
receives...
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 119,700
units.
Amount
Sales
$4,788,000
Cost of goods sold
3,559,884
Selling and administrative expenses
468,445
Net income
$759,671
Fixed costs for the period were cost of goods sold $960,000, and
selling and administrative expenses $247,000.
In July, normally a slack manufacturing month, ThreePoint Sports
receives...
PinaColada Sports Inc. manufactures basketballs for the Women’s National Basketball Association (WNBA). For the first 6...
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...
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...
Speedy Sports manufactures basketballs that sell for $ 25. At present, the ball is manufactured in...
Speedy Sports manufactures basketballs that sell for $ 25. At
present, the ball is manufactured in a small plant that relies
heavily on direct labor workers. Therefore, variable costs are
high, totaling $ 15 per ball, of which 60% is direct labor cost.
Fixed costs are $ 210,000. Last year, the firm sold 30,000
balls.
Compute (1) the CM ratio and the breakeven point in units and
(2) the degree of operating leverage.
Due to an increase in labor rates,...
The National Basketball League is a professional sports league in North America. Each team in the...
The National Basketball League is a professional sports league
in North America. Each team in the league must participate the
revenue sharing system. For the purposes of the revenue sharing
plan, there are no limits to the amount each team may contribute to
the plan. Each team is subject to a receipt limits based their
designated market area (DMA). For teams with a DMA between
1.5-2.249 households, the final receipt limit is set at 75% of the
initial receipt; for...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Why would UnderArmour want to be sure that consumers can clearly see different models ( about...
- Five years ago, Miguel invested a stock with price $35 per share. The stock price at...
- You are touring a distant planet on which the magnitude of the gravitational acceleration is 65%...
- GDP increased from $16.55 trillion to $17.28 trillion. What was the growth rate of GDP? The...
- Forming an Accountable Care Organization in a hospital setting What is an ACO and its reimbursement?...
- Implement a method that meets the following requirements: (a) Has the same requirements as the above...
- The Good’n’Fresh Grocery Store has two checkout lanes and four employees. Employees are equally skilled, and...
ADVERTISEMENT