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 119,400 units.

		Amount
Sales		$4,776,000
Cost of goods sold		3,509,190
Selling and administrative expenses		513,516
Net income		$753,294

Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $258,000.

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) & (b)

(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

Answer 1

Net Income Reject Accept Order Order Increase Revenues Cost of Goods sold Selling and administrative ExpensesS Net Income (Decrease) -S 270,000 S 270,000 -S 213,500 S 213,500 - S 28,700S 28,700 - S 27,800S 27,800 Working notes: Cost of goods sold per Unit-(S3,509,190-S960,000)/119,400 Cost of Goods sold-10.000#32 1 .35-$2 13,500 Revenues -10,000*$27- $270,000 S21.35 Selling and administrative Expensse per Unit-(S513,516-258,000)/119,400- S2.14+S0.73- $2.87 Selling and administrative Expenses -10,000 $2.87-S28,700 Should Threepoint sports Inc, accept the special order? Yes Incremental Revenue is S27,800