Prepare an incremental analysis for the special order. NI increase $37,500 Should S Sports Inc. accept the special order? Explain your answer. What is the minimum selling price on the special order to produce net income of $5.00 per ball?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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S Sports Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2022, the company reported the following operating results while operating at 80% of plant capacity and producing 120,000 units.

Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $225,000.

In July, S Sports receives a special order for 10,000 basketballs at $28 each from the Philippine Basketball Association (PBA). Acceptance of the order would increase variable selling and administrative expenses $0.75 per unit because of shipping costs but would not increase fixed costs and expenses.

Instructions

  1. Prepare an incremental analysis for the special order.
    1. NI increase $37,500
  2. Should S Sports Inc. accept the special order? Explain your answer.
  3. What is the minimum selling price on the special order to produce net income of $5.00 per ball?
  4. What nonfinancial factors should management consider in making its decision?

 

Sales
Cost of goods sold
Selling and administrative expenses
Net income
Amount
$4,800,000
3,600,000
405,000
$ 795,000
Transcribed Image Text:Sales Cost of goods sold Selling and administrative expenses Net income Amount $4,800,000 3,600,000 405,000 $ 795,000
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