Question

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 120,400 units.

		Amount
Sales		$4,816,000
Cost of goods sold		3,700,304
Selling and administrative expenses		492,084
Net income		$623,612

Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $226,000.

In July, normally a slack manufacturing month, ThreePoint Sports receives a special order for 10,000 basketballs at $29 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.76 per unit because of shipping costs but would not increase fixed costs and expenses.

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?

Yes or No

Could someone please show the work?

Answer 1

Ans:

a.

	Reject order	Accept order	Net income increase(decrease)
Revenues	0	290000	290000
Cost of goods sold	0	227600	-227600
Selling and administrative expenses	0	29700	-29700
Net income	0	32700	32700
b
Yes accept the special order

Workings:
Per unit:
Cost of goods sold	22.76	=(3700304-960000)/120400
Selling and administrative expenses	2.21	=(492084-226000)/120400
Revenues	290000	=10000*29
Cost of goods sold	227600	=10000*22.76
Selling and administrative expenses	29700	=10000*(2.21+0.76)

Hope This Helped ! Let Me Know In Case of Any Queries.