P9-1A Pro
Sports Inc. manufactures basketballs for the National Basketball Association
(NBA). For the first 6 months of 2008, the company reported the following
operating 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 factors should management consider in making its decision?
File name: P9-1A-Pro sports Template.xls File type: application/vnd.ms-excel Price: $6
