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 118,500 units.

		Amount
Sales		$4,503,000
Cost of goods sold		3,448,500
Selling and administrative expenses		402,750
Net income		$651,750

Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $225,000.

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 $0.73 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

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. (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 $ 10000*27 = 270000 $270000 Cost of goods sold 10000*21 = -210000 -210000 Selling and administrative expenses 10000*2.23 = -22300 -22300 Net income $ $37700 $37700 (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 $21+2.23+5 = 28.23