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 118,700 units.

		Amount
Sales		$4,748,000
Cost of goods sold		3,582,083
Selling and administrative expenses		503,262
Net income		$662,655

Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $235,000.

In July, normally a slack manufacturing month, ThreePoint Sports receives a special order for 10,000 basketballs at $28 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.77 per unit because of shipping costs but would not increase fixed costs and expenses.

(a) Prepare an incremental analysis for the special order.

	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?

                                                                      YesNo

What is the minimum selling price on the special order to produce net income of $5.00 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.

	Reject Order		Accept Order		Net Income Increase (Decrease)
Revenues	0	$	280000	$	280000	$
Cost of goods sold	0		-220900		-220900
Selling and administrative expenses	0		-30300		-30300
Net income	0	$	28800	$	28800	$

(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 $5.00 per ball? (Round answer to 2 decimal places, e.g. 15.25.)

Minimum selling price

(24.35+0.77+5)

$30.12