Answer:
since the special order does not affect current normal sales, its analysis should only consider incremental expenses, not regular expenses:
A) Income statement without the special order
total revenue = $68 x 80,100 = $5,446,800
- COGS = ($2,446,880)
- Direct materials $897,120
- Direct labor $608,760
- Overhead $941,000
gross profit = $2,999,920
- SG&A = ($1,022,000)
- Selling exp. $559,000
- Administrative exp. $463,000
net income = $1,977,920
B) incremental revenue from special order = 14,900 x $63 = $938,700
incremental costs:
- direct materials = ($897,120 / 80,100 units) x 17,900 = $200,480
- direct labor = ($608,760 / 80,100 units) x 17,900 = $136,040
- overhead = ($658,700 / 80,100 units) x 17,900 = $147,200
- selling expenses = [($335,400 / 80,100 units) x 17,900] + ($2.70 x 17,900) = $74,952 + $48,330 = $123,282
- administrative expenses = $940
- total incremental costs = $607,942
incremental gain from special order = $938,700 - $607,942 = $330,758
Income statement with the special order
total revenue = $6,385,500
- COGS = ($2,930,600)
- Direct materials $1,097,600
- Direct labor $744,800
- Overhead $1,088,200
gross profit = $3,454,900
- SG&A = ($1,146,222)
- Selling exp. $682,282
- Administrative exp. $463,940
net income = $2,308,678
The best example of a factor that indicates the success of a corporation is its projected earnings. The earnings play a major role in characterizing a successful company. If earnings are stable, has positive growth, and reflects quality, then the corporation is successful.
Answer: Option B
Explanation: A hedonic treadmill is a person's propensity to stay at a fairly stable level of comfort and happiness following a fortune shift or big goals being accomplished. As an individual earns more money, their aspirations and impulses grow in tandem, as per the hedonic treadmill model.
As a consequence, the increase in income does not result in a lasting improvement in satisfaction. The hedonic treadmill phenomenon states the often-held fact that wealthy individuals are just no happier than people living in poverty, and sometimes quite happy are those with serious financial problems.
Thus, from the above we can conclude that the correct option is B.
Answer:
1. Not all future costs are relevant in decision making. Only relevant costs make a difference in decision-making. The future costs that change according to each specific alternative are relevant for the decision process. So, not all future costs are relevant in the decision making process.
2. Incremental cost - Also called differential costs, these costs are the difference in total costs after changing something or adding a new activity. These are relevant costs when evaluating some alternatives.
Opportunity cost - This is the benefit that we miss out when we choose one alternative over another. Although not present in general accounting, this approach is often used by managers.
Sunk cost - These are past costs. This is money that has been spent in the past and cannot be recovered. Thus, these costs are excluded from the decision-making process, as they are omnipresent and are not affected by the decision.