Question 4:

Joudeh Sports Inc. manufactures basketballs for the Womens National Basketball Association (WNBA). For the first 6 months of 2020, the company reported the following operating results while operating at 80% of plant capacity and producing 120,000 units.

Sales

Cost of goods sold

Selling and administrative expenses Net income

$4,800,000 3,600,000

405,000 $795,000

Variable costs for the period were cost of goods sold $2,500,000, and selling and administrative expenses $170,000.

In July, normally a slack manufacturing month, Joudeh Sports receives a special order for 10,000 basketballs at $22 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.75 per unit because of shipping costs and all fixed costs will increase by .5%.

Instructions

a. Prepare an incremental analysis for the special order.

b. Should Joudeh Sports Inc. accept the special order? Explain your answer