QUESTION 2

Haslett manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2017, the company reported the following operating results while operating at 90% of plant capacity.

	Amount (RM)	Per Unit (RM)
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 RM900,000 and selling and administrative expenses RM135,000.

In July, normally a slack manufacturing month, Haslett receives a special order for 9,000 basketballs at RM32 each from the European Basketball Association (EBA). Acceptance of the order would increase variable selling and administrative expenses RM0.50 per unit because of shipping costs but would not increase fixed costs and expenses.

Required

(a) Prepare an incremental analysis for the special order. (6 marks)

(b) Should Haslett accept the special order? (1 mark)

(c) What is the minimum selling price on the special order to produce a net income of RM5.00 per ball? (2 marks)

(d) What nonfinancial factors should management consider in making its decision? (3 marks)