Question 4 ShurShot Sports Inc. manufactures basketballs for the National Basket

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Question 4 ShurShot Sports Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2014, 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 $5,002,200 3,744,967 438,288 $818,945 Fixed costs for the period were cost of goods sold $1,080,700, and selling and administrative expenses $219,144. In July, normally a slack manufacturing month, ShurShot Sports receives a special order for 10,000 basketballs at $29 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.49 per unit because of shipping costs but would not increase fixed costs and expenses. 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 290000 Cost of goods sold Selling and administrative expenses Net income Click if you would like to Show work for this question: Open Show Work

Explanation / Answer

Variable cost per unit: Cost of goods sold (3744967-1080700) /119100 22.37 Selling and Admin exp (438288-219144) /119100 1.84 Incremental analysis: Reject Accept Net icnome Order Order Increase/Decrease Revenue 0 290000 290000 Cost of Goods sold 0 -223700 -223700 Selling and admin expense 0 -23300 -23300 Net income 0 43000 43000 YES, Order must be accepted Minimum Selling price for special order: Cost per unit: Cost of goods sold 22.37 Selling and admin expense (1.84+0.49) 2.33 Cost per unit: 24.7 Add: Target profit per unit 6.66 Minimum Selling price for special order: 31.36

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