Question

Problem 20-1A 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 119,900 units. Amount Sales $4,676,100 3,569,024 Cost of goods sold Selling and administrative expenses 443,437 Net income $663,639 Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $248,000. 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 $0.76 per unit because of shipping costs but would not increase fixed costs and expenses.

Answer 1

	Reject order	Accept order	Net income increase(decrease)
Revenues	0	280000	280000
Cost of goods sold	0	-217600	-217600
Selling and administrative expenses	0	-23900	-23900
Net income	0	38500	38500
b
Yes accept the special order
c
Minimum selling price	29.23	=21.76+1.63+0.76+5.08
Workings:
Per unit:
Cost of goods sold	21.76	=(3569024-960000)/119900
Selling and administrative expenses	1.63	=(443437-248000)/119900
Revenues	280000	=10000*28
Cost of goods sold	217600	=10000*21.76
Selling and administrative expenses	23900	=10000*(1.63+0.76)