Question - Pro Sports Inc. manufactures basketballs for professional basketball associations. For the first six months of 2016, the company reported the following operating results while operating at 90% of plant capacity:
|
|
Amount
|
Per Unit
|
|
Sales
|
$4,888,350
|
$51.00
|
|
Cost of goods sold
|
3,354,750
|
35.00
|
|
Selling and administrative expenses
|
421,740
|
4.40
|
|
Net income
|
$1,111,860
|
$11.60
|
Fixed costs for the period were cost of goods sold of $958,500, and selling and administrative expenses of $172,530.
In July, normally a slack manufacturing month, Pro Sports receives a special order for 9,585 basketballs at $32 each from the Italian Basketball Association. Accepting the order would increase variable selling and administrative expenses by $0.50 per unit because of shipping costs, but it would not increase fixed costs and expenses.
Prepare an incremental analysis for the special order.
Should Pro Sports Inc. accept the special order?
What is the minimum selling price on the special order to produce net income of $5.00 per ball?