Based on the information given the net income for the year will be is : $2.9 million.
<h3>Net income</h3>
Using this formula
Net income=Dividend declared-Decrease in Ending Retained earning
Where:
Dividend declared=$4.4 million
Decrease in Ending Retained earning=$1.5 million
Let plug in the formula
Net income=$4.4 million-$1.5 million
Net income=$2.9 million
Inconclusion the net income for the year will be is : $2.9 million.
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In a case whereby poornima gupta is retiring soon, so she is concerned about her investments providing her steady income every year, the risk is poornima most concerned about protecting against is interest reinvestment risk.
<h3>What is
interest reinvestment risk?</h3>
Reinvestment rate risk can be described as the risk that should be considered in the case whereby the investor have the reason to carry out reinvestment in regards with the future cash flows which could come inform of a lower return as a result of the interest rate declines.
It should be that this risk is very important to be taken serious by the investors because any slight mistake can result to very huge lost in the part of the investor and this can bring down there investor in term of finance which is very dangerous for his health as well as other investment that he have outside.
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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
Selling for much less than their selling prices just two to three years ago.
