|
|
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 NI increase $31,000
Prepare
an incremental analysis for the special order. Should Pro Sports Inc. accept the special order? Explain your answer.
What is the minimum selling price on the special order to produce net income of $4.10 per ball?
What nonfinancial factors should management consider in making its decision?
PREVIEW [EXCEL TEMPLATE]
PROBLEM
9-1A
(a)
|
Decision
|
Net
Income
|
|||
|
Reject
|
Accept
|
|
Increase
|
|
|
Order
|
Order
|
|
(Decrease)
|
|
|
Revenues
($10,000 X $28)
|
$0
|
$280,000
|
|
$280,000
|
|
Cost
of goods sold
|
0
|
224,000
|
(1)
|
-224,000
|
File
name:
P9-1A-Pro-Sports-Inc.xls File type:
application/vnd.ms-excel PRICE: $7
