Morello inc manufactures basketballs for the national

Reference no: EM13589211

Morello Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2014, the company reported the following operating results while operating at 90% of plant capacity and producing 90,000 units.

	Amount	Per Unit
Sales	$4,500,000	$50
Cost of goods sold	3,060,000	?34
Selling and administrative expenses	360,000	??4
Net income	$1,080,000	$12

Fixed costs for the period were cost of goods sold $900,000, and selling and administrative expenses $180,000.

In July, normally a slack manufacturing month, Morello receives a special order for 10,000 basketballs at $30 each from the Chinese Basketball Association (CBA). 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. (a) NI increase $35,000

(b)	Should Morello Inc. accept the special order?

(c)	What is the minimum selling price on the special order to produce net income of $5.50 per ball?

Reference no: EM13589211

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