The parts of this question must be completed in order. This part will be availab

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The parts of this question must be completed in order. This part will be available when you complete the part above.

The parts of this question must be completed in order. This part will be available when you complete the part above.

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 119,200 units.

Amount Sales $4,768,000 Cost of goods sold 3,790,116 Selling and administrative expenses 567,392 Net income $410,492
Fixed costs for the period were cost of goods sold $1,080,700, and selling and administrative expenses $283,696.

   In July, normally a slack manufacturing month, ShurShot Sports receives a special order for 10,100 basketballs at $28 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. 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 119,200 units. Fixed costs for the period were cost of goods sold $1,080,700, and selling and administrative expenses $283,696. In July, normally a slack manufacturing month, ShurShot Sports receives a special order for 10,100 basketballs at $28 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).)

Explanation / Answer

Cost of goods sold ($3,600,000 - 960,000) / 120,000 = $22 variable cost per unit
Selling and administrative expenses (405,000 - 225,000) / 120,000 = $1.50 variable cost per unit

A) Prepare an incremental analysis for the special order.
270,000 (10,000 x $27) incremental sales
Less:
220,000 (10,000 x $22) incremental COGS
20,000 [(1.50 + 0.50) x 10,000) incremental selling and administrative expense
$30,000 incremental net income

b) Should Shurshot Sports Inc. accept the special order? Explain your answer.
Yes. It would increase total net income by $30,000.

C) What is the minimum selling price on the special order to produce net income of $4.00 per ball?
$4.00 x 10,000 = $40,000 net income needed
Total Sales - 220,000 - 20,000 = 40,000
Total Sales = $280,000
280,000 / 10,000 = $28.000 minimum selling price

D) what non financial factors should management consider in making its decision?
The main problem is that other buyers (current or potential) may find out about the special price and want it for themselves.

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