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 118,800 units.
Amount | |||
---|---|---|---|
Sales | $4,514,400 | ||
Cost of goods sold | 3,633,000 | ||
Selling and administrative expenses | 517,540 | ||
Net income | $363,860 |
Fixed costs for the period were cost of goods sold $960,000, and
selling and administrative expenses $274,000.
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 $0.77
per unit because of shipping costs but would not increase fixed
costs and expenses.
Part 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 | $enter revenues in dollars | $enter revenues in dollars | $enter revenues in dollars | ||||
Cost of goods sold | enter the cost of goods sold in dollars | enter the cost of goods sold in dollars | enter the cost of goods sold in dollars | ||||
Selling and administrative expenses | enter selling and administrative expenses in dollars | enter selling and administrative expenses in dollars | enter selling and administrative expenses in dollars | ||||
Net income | $enter net income in dollars | $enter net income in dollars | $enter net income in dollars |
(b) Should ThreePoint Sports Inc. accept the
special order?
select between Yes and NoYesNo YesNo
eTextbook and Media
Part 2
What is the minimum selling price on the special order to produce net income of $5.11 per ball? (Round answer to 2 decimal places, e.g. 15.25.)
Minimum selling price | $enter the minimum selling price rounded to 2 decimal places |
eTextbook and Media
Variable cost of goods sold per unit = (3633000-960000)/118800 =
$22.5
Variable selling and administrative expenses
=(517540-274000)/118800= $2.05
For special order = $2.05+$0.77 = $2.82
Reject Order | Accept Order | Net Income Increase (Decrease) | ||
Revenues | $ - | $ 2,90,000 | $ 2,90,000 | =10000*29 |
Cost of Goods Sold | $ - | $ 2,25,000 | $ -2,25,000 | =10000*22.5 |
Selling and Administrative expenses | $ - | $ 28,200 | $ -28,200 | =10000*2.82 |
Net Income | $ - | $ 36,800 | $ 36,800 |
(b)
company should accept the special order, as it results in Increase
in net income by $36800
2.
Cost of Goods Sold | $ 2,25,000 |
Selling and Administrative expenses | $ 28,200 |
Total Expenses | $ 2,53,200 |
Units | 10000 |
Cost per unit | $ 25.32 |
Net Income | $ 5.11 |
Minimum Selling Price | $ 30.43 |
ThreePoint Sports Inc. manufactures basketballs for the Women’s National Basketball Association (WNBA). For the first 6...
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