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 w operating at 80% of plant capacity and producing 119,400 units. Amount Sales Cost of goods sold Selling and administrative expenses Net income s 4,656,600 3,684,708 526,292 $445,600 Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $266,000 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 ord 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. (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

Answer 1

(a)		Reject order	Accept order	Net Income Increase (Decrease)
	Revenues (10000 X $28)	0	$         2,80,000	$        2,80,000
	Cost of goods sold	0	$         2,28,200	$       -2,28,200
	Selling and administrative expenses	0	$            29,500	$          -29,500
	Net Income	0	$            22,300	$            22,300
	Cost of goods sold	=	[10000 X ($3684708-960000)/119400)]
		=	10000 X $22.82
		=	$         2,28,200
	Selling and administrative expenses	=	[10000 X ($526292-266000)/119400)] + (10000 X $0.77)
		=	(10000 X $2.18) + (10000 X $0.77)
		=	$            29,500
(b)	As the Net Income is positive. Therefore Three points sports Inc. should Accept the special order
(c)	Required Net Income	=	$                 5.16
	Cost of goods sold	=	$               22.82
	Selling and administrative expenses ($2.18 + $0.77)	=	$                 2.95
	Minimum Selling Price	=	$               30.93