Special-Order Decision, Traditional Analysis, Qualitative Aspects Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national sporting goods chain recently submit...
Special-Order Decision, Traditional Analysis, Qualitative Aspects
Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national sporting goods chain recently submitted a special order for 4,500 pairs of weight-lifting gloves. Feinan Sports was not operating at capacity and could use the extra business. Unfortunately, the order’s offering price of $12.70 per pair was below the cost to produce them. The controller was opposed to taking a loss on the deal. However, the personnel manager argued in favor of accepting the order even though a loss would be incurred; it would avoid the problem of layoffs and would help maintain the community image of the company. The full cost to produce a pair of weight-lifting gloves is presented below.
| Direct materials | $7.40 |
| Direct labor | 3.80 |
| Variable overhead | 1.60 |
| Fixed overhead | 3.10 |
| Total | $15.90 |
No variable selling or administrative expenses would be associated with the order. Non-unit-level activity costs are a small percentage of total costs and are therefore not considered.
1. Assume that the company would accept the
order only if it increased total profits. Should the company accept
or reject the order?
Provide supporting computations. If required, round your answers to the nearest cent. Enter a loss as a negative amount.
| Incremental revenue per pair | $ |
| Incremental cost per pair | |
| Incremental gain (loss) per pair | $ |
Total Increase/ decrease in income: $_______________
2. Suppose that Feinan Sports has negotiated
with the potential customer, and has determined that it can
substitute cheaper materials, reducing direct materials cost by
$0.80 per unit. In addition, the company’s engineers have found a
way to reduce direct labor cost by $0.40 per unit. Should the
company accept or reject the order?
Provide supporting computations. If required, round your answers to the nearest cent. Enter a loss as a negative amount.
| Incremental revenue per pair | $ |
| Incremental cost per pair | |
| Incremental gain (loss) per pair | $ |
Total Increase/ decrease in income: $________________
Homework Answers
Solution 1:
| Incremental revenue per pair | $12.70 |
| Incremental cost per pair | $12.80 |
| Incremental gain (loss) per pair | -$0.10 |
Total Increase/ decrease in income = 4500*-$0.10 = ($450)
Solution 2:
| Incremental revenue per pair | $12.70 |
| Incremental cost per pair | $11.60 |
| Incremental gain (loss) per pair | $1.10 |
Total Increase/ decrease in income = 4500*$1.10 = $4,950 increase
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Special-Order Decision, Traditional Analysis, Qualitative Aspects Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national sporting goods chain recently submit...
Special-Order Decision, Traditional Analysis, Qualitative Aspects Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A...
Special-Order Decision, Traditional Analysis, Qualitative Aspects Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national sporting goods chain recently submitted a special order for 4,500 pairs of weight-lifting gloves. Feinan Sports was not operating at capacity and could use the extra business. Unfortunately, the order’s offering price of $12.70 per pair was below the cost to produce them. The controller was opposed to taking a loss on the deal. However, the personnel manager argued in favor of accepting...
Special-Order Decision, Traditional Analysis, Qualitative Aspects Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A...
Special-Order Decision, Traditional Analysis, Qualitative Aspects Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national sporting goods chain recently submitted a special order for 4,000 pairs of weight-lifting gloves. Feinan Sports was not operating at capacity and could use the extra business. Unfortunately, the order’s offering price of $12.70 per pair was below the cost to produce them. The controller was opposed to taking a loss on the deal. However, the personnel manager argued in favor of accepting...
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2020, the company reported the following operating results while
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Sales
$4,748,000
Cost of goods sold
3,582,083
Selling and administrative expenses
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Net income
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Fixed costs for the period were cost of goods sold $960,000, and
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In July, normally a slack manufacturing month, ThreePoint Sports
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ThreePoint Sports Inc. manufactures basketballs for the Women’s National Basketball Association (WNBA). For the first 6...
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...
ThreePoint Sports Inc. manufactures basketballs for the Women's National Basketball Association (WNBA). For the first 6...
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...
Problem 21-1A ThreePoint Sports Inc. manufactures basketballs for the Women's National Basketball Association (WNBA). For the...
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ThreePoint Sports Inc. manufactures basketballs for the Women's National Basketball Association (WNBA). For the first 6...
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 119,100 units. Sales Cost of goods sold Selling and administrative expenses Net income Amount $4,525,800 3,519,459 412,841 $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...
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 118,700 units.
Amount
Sales
$4,748,000
Cost of goods sold
3,582,083
Selling and administrative expenses
503,262
Net income
$662,655
Fixed costs for the period were cost of goods sold $960,000, and
selling and administrative expenses $235,000.
In July, normally a slack manufacturing month, ThreePoint Sports
receives...
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...
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...
Problem 21-1A 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 120,400 units. Sales Cost of goods sold Selling and administrative expenses Net income Amount $ 4,816,000 3,700,304 492,084 $ 623,612 Fixed costs for the period were cost of goods sold $ 960,000, and selling and administrative expenses $ 226,000. In July, normally a...
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 119,100 units. Sales Cost of goods sold Selling and administrative expenses Net income Amount $4,525,800 3,519,459 412,841 $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...
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