Question

Blue 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 120,100 units.

		Amount
Sales		$4,804,000
Cost of goods sold		3,484,502
Selling and administrative expenses		448,773
Net income		$870,725

Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $241,000.

In July, normally a slack manufacturing month, Blue 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.

Prepare an incremental analysis for the special order. (Round all per unit computations to 2 decimal places, e.g. 15.25. If amount decreases net income then enter the amount 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		$		$		$

Should Blue Sports Inc. accept the special order?

YesNo

LINK TO TEXT

What is the minimum selling price on the special order to produce net income of $5.06 per ball? (Round answer to 2 decimal places, e.g. 15.25.)

Minimum selling price

$

Answer 1

	Reject order	Accept order	Net income increase(decrease)
Revenues	0	280000	280000
Cost of goods sold	0	-210200	-210200
Selling and administrative expenses	0	-25000	-25000
Net income	0	44800	44800
b
Yes accept the special order
c
Minimum selling price	28.58	=21.02+1.73+0.77+5.06
Workings:
Per unit:
Cost of goods sold	21.02	=(3484502-960000)/120100
Selling and administrative expenses	1.73	=(448773-241000)/120100
Revenues	280000	=10000*28
Cost of goods sold	210200	=10000*21.02
Selling and administrative expenses	25000	=10000*(1.73+0.77)