first 6 months of 2009, 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 $900,000, and selling and administrative
expenses $135,000.
In July, normally a slack manufacturing month, Haslett receives a special order for 9,000 basketballs
at $32 each from the European Basketball Association (EBA). Acceptance of the order
would increase variable selling and administrative expenses $0.50 per unit because of shipping
costs but would not increase fixed costs and expenses.
Instructions
(a) Prepare an incremental analysis for the special order.
(b) Should Haslett 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 nonfinancial factors should management consider in making its decision?