Question

Twifty 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 118,800 units. Amount Sales $4,514,400 Cost of goods sold 3,633,000 Selling and administrative expenses 517,540 Net income $363,860 Fixed costs for the period were the cost of goods sold $960,000, and selling and administrative expenses $274,000. In July, normally a slack manufacturing month, Swifty Sports receives a special order for 10,000 basketballs at $29 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.77 per unit because of shipping costs but would not increase fixed costs and expenses.

Prepare an incremental analysis for the special order.

Answer 1

Incremental Analysis for special order

units 10,000

offer price $290,000

Variable cost:

Cost of goods sold($22.5 *10,000) 225,000

Selling and Administrative expenses

($2.05*10,000) 20,500

shipping cost (0.77*10,000) 7,700 (253,200)

Additional contribution 36,800

Step-by-step explanation:

variable cost goods sold per unit = ( 3,633,000 - 960,000)/118800 = $22.5

Variable selling and admin expense per unit = ( 517,540 - 274,000)/118800

= $ 2.05