Reference no: EM132070272

Question - ShurShot Sports 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 80% of plant capacity and producing 120,000 units.

	Amount
Sales	$4,800,000
Cost of goods sold	3,600,000
Selling and administrative expenses	405,000
Net income	$795,000

Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $225,000. In July, normally a slack manufacturing month, ShurShot Sports receives a special order for 10,000 basketballs at $27 each from the Greek Basketball Association (GBA). 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 $30,000.

(b) Should ShurShot Sports Inc. accept the special order? Explain your answer.

(c) What is the minimum selling price on the special order to produce net income of $4.00 per ball?

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