Question

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 120,000 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?

                                                                      NoYes

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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

Answer is given below with working