Pro Sports Inc. manufactures basketballs for the National Basketball Association (NBA). For the

Pro Sports Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2008, the company reported the following operating results while operating at 90% of plant capacity and producing 112,500 units.    

 

                                                                                   Amount 

 

Sales                                                                     $4,500,000

Cost of goods sold                                                    3,600,000

Selling and administrative expenses                              450,000

Net income                                                             $  450,000

 

Fixed costs for the period were: cost of goods sold $1,080,000, and selling and administrative expenses $225,000. 

In July, normally a slack manufacturing month, Pro Sports receives a special order for 10,000 basketballs at $28 each from the Italian Basketball Association (IBA). 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 Pro 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 $4.10 per ball?

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

Make incremental analysis related to make or buy, consider opportunity cost, and identify nonfinancial factors.