Morello Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2014, the company reported the following operating results while operating at 90% of plant capacity and producing 90,000 units.
|
Amount
|
Per Unit
|
|
Sales
|
$4,500,000
|
$50
|
|
Cost of goods sold
|
3,060,000
|
?34
|
|
Selling and administrative expenses
|
360,000
|
??4
|
|
Net income
|
$1,080,000
|
$12
|
|
|
Fixed costs for the period were cost of goods sold $900,000, and selling and administrative expenses $180,000.
In July, normally a slack manufacturing month, Morello receives a special order for 10,000 basketballs at $30 each from the Chinese Basketball Association (CBA). 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
| (a) |
Prepare an incremental analysis for the special order.
(a) NI increase $35,000
|
| (b) |
Should Morello Inc. accept the special order?
|
| (c) |
What is the minimum selling price on the special order to produce net income of $5.50 per ball?
|