Problem 26-1A LINK TO TEXT Problem 26-1A ThreePoint Sports Inc. manufactures bas

Question

Problem 26-1A

LINK TO TEXT

Problem 26-1A

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 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.

Explanation / Answer

Variable cost per unit: Total cost of goods sold 3448500 Less: Fixed 960,000 Variable Cost of goods sold 2,488,500 Number of units 118500 Variable Cost of goods sold 21 Selling and admin expense 402750 Less: Fixed 225000 Variable selling expense 177750 Number of units 118500 Selling OH per unit 1.5 Incremental Analysis: Reject Accept Net income Order Order Increase (Decrease) Revenue 4503000 4773000 270000 Cost of Goods sold 3448500 3658500 -210000 Selling and admin OH 402750 425050 -22300 Net income 651750 689450 37700 YES, Three Point sports Inc shall accept the order. Minimum Seling price: Variable cost per unit (21+1.5+0.73) 23.23 Add: Desired Contribution 5 Minimum Seling price: 28.23

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