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Pro Sports Inc. manufactures basketballs for professional basketball associations. For the first six months...

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Question

Accounting

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 $4,500,000 $ 50.00

Cost of goods sold $ 3,150,000 35.00

Selling and administrative expenses 360,000 4.00

net income $ 990,000 11.00

Fixed costs for the period were cost of goods sold of $900,000, and selling and

administrative expenses of $162,000.

In July, normally a slack manufacturing month, Pro Sports receives a special order for 9,000

basketballs at $30 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.

Instructions

a)Prepare an incremental analysis for the special order.

(b)Should Pro Sports Inc. accept the special order?

(c)What is the minimum selling price on the special order to produce net income of $5.00 per ball?

(d)What non-financial factors should management consider in making its decision?

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