Top Sports Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2002, the company reported the following operat- ing results while operating at 90% of plant capacity.

Fixed costs loi the period were: cost of goods sold ^ 1,080,000, and selling and administrative expenses \($225,000\). In July, normally a sl.uk manufacturing month, Pop Sports receives .i spec ial order for 10,000 basketballs at s^4 each from the Italian Basketball Association (IBA). Acceptance ol the order would increase variable selling and administrative expenses \($0.50\) pei unit because ol shipping costs but would no1 increase li\ed costs and expense

Instructions

(a) Prepare an incremental analysis for the special order.

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

(c) What is the minimum selling price on the special order to produce net income of \($4\) per ball?

(d) What nonfinancial factors should management consider in making its decision?

Transcribed Image Text:

Sales Cost of goods sold Selling and administrative expenses Net income Amount Per Unit $4,500,000 3,600,000 $50.00 40.00 450,000 5.00 $ 450,000 5.00