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		$5,709,600		$52.00
Cost of goods sold		3,733,200		34.00
Selling and administrative expenses		417,240		3.80
Net income		$1,559,160		$14.20

Fixed costs for the period were cost of goods sold of $1,098,000, and selling and administrative expenses of $197,640.

In July, normally a slack manufacturing month, Pro Sports receives a special order for 10,980 basketballs at $30 each from the Italian Basketball Association. Accepting the order would increase variable selling and administrative expenses by $1.00 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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(b) The parts of this question must be completed in order. This part will be available when you complete the part above.

(c) The parts of this question must be completed in order. This part will be available when you complete the part above.

Answer 1

(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	(10980*30)			$329400
Incremental cost:
Variable COGS	10980*24	$263520
Variable S & A	10980*2	21960
Additional S & A		10980		296460
Incremental income				$32940