Question

Weygandt, Financial & Managerial Accounting, 2e Help I System A Problem 21-1A ThreePoint Sports Inc. manufactures basketballs for the Women's National plant capacity and producing 120,300 units Basketball Association (WNDA). For the first & months of 2017, the company reported the folowing operating results white operating at sons af Cost of goods sold Selling and administrative expenses 4,812,000 3,494,721 92,021 5 825,258 Fixed costs for the period were cost of goods sold $ 960,000, and selling and administrative expenses $ 243,000 In July, normally a slack manufactuning month, ThreePoint Sports receives a special order for 10,000 basketballs at $ 29 each from the Greek Basketball Association (GRA). 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 Your answer is partially correct Try agan (a) Prepare an incremental analysis for the special onder (Round all per unit computations to 2 decimal places, e-q. 15.as. Enter negative amounts using either a negative sign preceding the number e.a Reject Accept Revenues Cost of goods sold Selling and administrative expenses Net income

Answer 1

Ans-a- Preparing an incremental analysis for the special order:-

	Reject Order	Accept Order	Net Income Increase (Decrease)
Revenues	$0	$290,000 (10,000*$29)	$290,000
Cost of goods sold	0	$210,700 (10,000 *$21.07)	($210,700)
Selling and administrative expenses	0	$28,000	($28,000)
Net Income	$0	$51,300	$51,300

Working Note:-

Variable Cost of goods sold per unit =($3,494,721-$960,000)/ 120,300

=$2,534,721/ 120,300

= $21.07

Cost of goods sold= 10,000*$21.07= $210,700

Variable selling and administrative expenses per unit = ($492,021-$243,000)/ 120,300

=$249,021/ 120,300

=$2.07

Selling and administrative expenses=10,000*( $2.07+0.73)

=10,000*$ 2.8

=$28,000

Ans-b- Yes, Three Point Sports Inc. should accept the special order.

Ans-c- Minimum selling price per unit to earn net income of $5.19 per ball:-

Let Selling Price be x

Sales- COGS-Selling Expenses= Net Income

10,000*x- 210,700-28,000= 10,000*5.19

On solving the above we get

=$290,600/ 10,000

=$29.06

Hence, the minimum selling price would be $29.06 per unit.

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