oogle ProSports manufactures basketballs for professional basketball associations. It has budgeted the following sales and expenses for 2022 assuming the company operates at 80% capacity. Full capacity is 112,500 units. Amount Per unit 4,500,000 50.00 Sales ( 90,000 units - all REGULAR SALES) "Cost of goods sold *Selling and administrative expenses 35.00 3,150,000 360,000 990,000 4.00 Net income 11.00 includes variable and fixed costs Fixed costs for the period were $900,000 for costs of goods sold and $162,000 for selling and administrative expenses. Pro Sports receives a special order for basketballs from the European Basketball Association. Accepting the special order would increase variable selling and administrative expenses by $ 1.50 per unit because of shipping costs but would not increase fixed costs Required: ( show all calculations) a) Convert the above income statement, showing a $990,000 profit, to a contribution type income statement (6 marks) b) Compute the contribution margin per unit (for regular sales)[3 marks). c) What is ProSport's excess capacity? (2 marks) d) Assume the special order is for 10,000 units at $30 per unit and the company is operating at 80% capacity. What is the minimum price Pro Sports should charge, in total and per unit, for this special order? (3 marks) Tan Spartathic order of nitrat2 porto 1. in Fixed costs for the period were $900,000 for costs of goods sold and $162,000 for selling and administrative expenses. Pro Sports receives a special order for basketballs from the European Basketball Association. Accepting the special order would increase variable selling and administrative expenses by $ 1.50 per unit because of shipping costs but would not increase fixed costs. Required: (show all calculations) a) Convert the above income statement, showing a $990,000 profit, to a contribution type income statement (6 marks) b) Compute the contribution margin per unit (for regular sales)(3 marks). c) What is ProSport's excess capacity? (2 marks) d) Assume the special order is for 10,000 units at $30 per unit and the company is operating at 80% capacity. i. What is the minimum price Pro Sports should charge, in total and per unit, for this special order? (3 marks) ii. if Pro Sports accepts this special order of 10,000 units at $30 per unit by how much will net income increase or decrease? (3 marks) iii. Should Pro Sports accept the special order? (1 mark) e) Assume the special order is for 25,000 units at $30 per unit and the company is operating at 80% capacity. i. What is the minimum price Pro Sports should charge, in total and per unit, for this special order? (hint: compute the total price first and then divide by the number of units) (5 marks) ii. Should Pro Sports accept the special order? (1 mark)
