SAVE FOR LATER SUBMIT ANSWER ThreePoint Sports Inc. manufactures basketballs for
ID: 2448026 • Letter: S
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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 118,500 units.Amount Sales $4,503,000 Cost of goods sold 3,448,500 Selling and administrative expenses 402,750 Net income $651,750
Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $225,000.
In July, normally a slack manufacturing month, ThreePoint Sports receives a special order for 10,000 basketballs at $27 each from the Greek Basketball Association (GBA). 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. (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 $ $ $
(b) Should ThreePoint Sports Inc. accept the special order?
YesNo What is the minimum selling price on the special order to produce net income of $5.00 per ball? (Round answer to 2 decimal places, e.g. 15.25.)
Minimum selling price $ Question Attempts: 0 of 3 used
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Copyright © 2000-2015 by John Wiley & Sons, Inc. or related companies. All rights reserved.Explanation / Answer
b) Since the special order gives a positive net income of $37700 therefore the order should be accepted
Right now the the net income per ball is $3.77 with Selling price of $27 per ball. In order to have minimum net income of $5 per ball Selling price needs to be increased by $1.23 (5-3.77)
Therefore minimum selling price to have net income of $5 per ball is $28.23 (27+1.23)
Variable Cost of goods sold = $3448500 - $960000 = $2488500 Per unit variable cost = $2488500/118500 units = $21.00 per unit Variable selling and administrative expenses = $402750 - $225000 = $177750 Per unit variable S&D expenses = $177750/118500 units = 1.5 per unit Per unit variable S&D expenses for special order=1.5 per unit + 0.73 per unit = 2.23 per unit If order accepted then increase in sales and expense are as follows Sales 270000 Cost of goods sold 210000 Selling and administrative expenses 22300 Net income 37700 Reject order ($) Accept order ($) Net income increase (decrease) ($) Total Per unit Total Per unit Total Per unit Revenues 4503000 38 4773000 37.14397 270000 27 Cost of goods sold -3448500 -29.1013 -3238500 -25.2023 -210000 -21 Selling and administrative expenses -402750 -3.39873 -380450 -2.9607 -22300 -2.23 Net Income 651750 5.5 689450 5.36537 37700 3.77Related Questions
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