Pro Sports Inc. Manufacture’s basketballs for the National Basketball Associatio

Question

Pro Sports Inc. Manufacture’s basketballs for the National Basketball Association (NBA). For the first 6 months of 2008, the company reported the following results while operating at 90% of plant capacity and producing 112,500 units.
Amount
Sales $4,500,000
Cost of goods sold 3,600,000
Selling and administrative expenses 450,000
Net income 450,000

Fixed costs for the period were: cost of goods sold $1,080,000 and selling and administrative expenses $225,000. In July, normally a slack manufacturing month, Pro Sports receives a special order for 10,000 basketballs at $28 each from the Italian Basketball Association (IBA). Acceptance of the order would increase variable selling and administrative expenses $0.50 per unit because of shipping costs but would not increase fixed costs and expenses.
Instructions:
a. Prepare an incremental analysis for the special order
b. Should Pro Sports Inc. accept the special order? Explain your answer.
c. What is the minimum selling price on the special order to produce net income of $4.10 per ball?
d. What nonfinancial factor should management consider in making its decision?

Explanation / Answer

Without Special With Special Incremental Analysis order order (112,500 units ) (122,500 units) Regular Sales @ $ 40. 4,500,000.00 4,500,000.00 0.00 Special order @$28 280,000.00 280,000.00 Manufacturing Costs : Cost of Goods Sold 1,800,000.00 1,965,000.00 165,000.00 (Variable Costs ) Cost of Goods Sold 450,000.00 450,000.00 0.00 (Fixed Costs ) Gross Profit on Sales 115,000.00

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.