Question

hreePoint 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 120,000 units.

		Amount
Sales		$4,680,000
Cost of goods sold		3,700,800
Selling and administrative expenses		532,400
Net income		$446,800

Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $260,000.

In July, normally a slack manufacturing month, ThreePoint Sports receives a special order for 10,000 basketballs at $27 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.

(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		$		$		$

(b) Should ThreePoint Sports Inc. accept the special order?

What is the minimum selling price on the special order to produce net income of $5.14 per ball? (Round answer to 2 decimal places, e.g. 15.25.)

Minimum selling price

Answer 1

(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	0	$	270000	$	270000	$
Cost of goods sold	0		10000*22.84 = -228400		-228400
Selling and administrative expenses	0		2.27+.75*10000 = -30200		-30200
Net income	0	$	11400	$	11400	$

(b) Should ThreePoint Sports Inc. accept the special order?

Yes

What is the minimum selling price on the special order to produce net income of $5.14 per ball? (Round answer to 2 decimal places, e.g. 15.25.)

Minimum selling price

22.84+2.27+.75 = $25.86