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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 119,100 units.
Amount Sales $4,525,800 Cost of goods sold 3,519,459 Selling and administrative expenses 412,841 Net income $593,500
Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $233,000.

In July, normally a slack manufacturing month, ThreePoint 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 $0.76 per unit because of shipping costs but would not increase fixed costs and expenses.

Explanation / Answer

a) Incremental analysis :

b) Yes, should accept the special order

Reject order Accept order Net income increase (decrease) Revenue 0 290000 290000 Cost of goods sold 0 -214900 -214900 Selling and administrative expense 0 -22700 -22700 Net income 0 52400 52400

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