Three Point 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 120,000 units.
| Amount | |
| Sales | $4,800,000 |
| Cost of goods sold | 3,800,000 |
| Selling and administrative expenses | 405,000 |
| Net Income | $ 795,000 |
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 $28 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.75 per unit because of shipping costs but would not increase fixed costs and expenses.
Instructions
- Prepare an incremental analysis for the special order.
- Should ThreePoint Sports inc. accept the special order? Explain your answer
- What is the minimum selling price on the special order to produce net income of $5.00 per ball?
- What nonfinancial factors should management consider in making its decision?
Solution
