Question - ShurShot Sports 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 80% of plant capacity and producing 120,000 units.
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Amount
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Sales
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$4,800,000
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Cost of goods sold
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3,600,000
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Selling and administrative expenses
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405,000
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Net income
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$795,000
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Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $225,000. In July, normally a slack manufacturing month, ShurShot Sports receives a special order for 10,000 basketballs at $27 each from the Greek Basketball Association (GBA). 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 $30,000.
(b) Should ShurShot Sports Inc. accept the special order? Explain your answer.
(c) What is the minimum selling price on the special order to produce net income of $4.00 per ball?
(d) What nonfinancial factors should management consider in making its decision?