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 119,100 units.

		Amount
Sales		$4,525,800
Cost of goods sold		3,519,459
Selling and administrative expenses		412,841
Net income		$593,500

Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $233,000.

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.

(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).) Net Income Reject Accept Increase Order Order (Decrease) $ $ $ Revenues Cost of goods sold Selling and administrative expenses $ Net income $ (b) Should Three Point Sports Inc. accept the special order? No Yes book and Media

Answer 1

Differential analysis

	Reject order	Accept order	Net income increase (decrease)
Revenue		290000	290000
Cost of goods sold		-214900	-214900
Selling and administrative expense		-22700	-22700
Net income		52400	52400

b) Yes should accept the order