FUNDAMENTALS OF ACCOUNTING
Carla Vista Inc. manufactures basketballs for the Women’s National Basketball Association (WNBA). For the first 6 months of 2022, the company reported the following operating results while operating at 80% of plant capacity and producing 118,600 units.
| Amount | |||
| Sales | $4,506,800 | ||
| Cost of goods sold | 3,475,506 | ||
| Selling and administrative expenses | 498,060 | ||
| Net income | $533,234 |
Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $249,000.
In July, normally a slack manufacturing month, Carla Vista receives a special order for 10,000 basketballs at $28 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.73 per unit because of shipping costs but would not increase fixed costs and expenses.
(a) Prepare an incremental analysis for the special order. (Round all per unit computations to 2 decimal places, e.g. 15.25. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
| Reject Order |
Accept Order |
Net Income Increase (Decrease) |
|||||
| Revenues | $enter revenues in dollars | $enter revenues in dollars | $enter revenues in dollars | ||||
| Cost of goods sold | enter the cost of goods sold in dollars | enter the cost of goods sold in dollars | enter the cost of goods sold in dollars | ||||
| Selling and administrative expenses | enter selling and administrative expenses in dollars | enter selling and administrative expenses in dollars | enter selling and administrative expenses in dollars | ||||
| Net income | $enter net income in dollars | $enter net income in dollars | $enter net income in dollars |
(b) Should Carla Vista Inc. accept the special order?
select an option No Yes
What is the minimum selling price on the special order to produce net income of $5.16 per ball? (Round answer to 2 decimal places, e.g. 15.25.)
| Minimum selling price | $enter minimum selling price in dollars rounded to 2 decimal places |
