Question

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 118,600 units. Amount Sales $4,506,800 Cost of goods sold 3,475,506 Selling and administrative expenses 498,060 Net income $533,234 Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $249,000. In July, normally a slack manufacturing month, ThreePoint Sports receives a special order for 10,000 basketballs at $28 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.73 per unit because of shipping costs but would not increase fixed costs and expenses.

Answer 1

Instructions are listed below.

Step-by-step explanation:

Giving the following information:

Producing 118,600 units. Amount Sales $4,506,800 Cost of goods sold 3,475,506 Selling and administrative expenses 498,060 Net income $533,234 Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $249,000.

ThreePoint Sports receives a special order for 10,000 basketballs at $28 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.73 per unit because of shipping costs but would not increase fixed costs and expenses.

Variable cost= (3,475,506 - 960,000)/118,600= $21.21

Fixed cost= 960,000

Variable selling and administrative= (498,060 - 249,000)/118,600= 2.1

Should it accept the offer?

Selling price= 28

Unitary variable cost= 21.21 + 2.1 + 0.73= 24.04

Contribution margin= 3.96

We don't have into account the fixed costs because it is a special offer and we have unsued capacity.

Increase in income= 3.96*10,000= $39,600