Chp 7 additional solutions

Chp 7 additional solutions - EXERCISE 7-2 (a) Revenues...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
EXERCISE 7-2 (a) Reject Order Accept Order Net Income Effect Revenues Materials ($0.50) Labor ($1.50) Variable overhead ($1.00) Fixed overhead Sales commissions Net income $ -0- -0- -0- -0- -0- -0- $ -0- $23,750 (2,500) (7,500) (5,000) (5,000) -0- $ 3,750 $23,750 (2,500) (7,500) (5,000) (5,000) -0- $ 3,750 (b) As shown in the incremental analysis, Innova should accept the special order because incremental revenue exceeds incremental expenses by $3,750. (c) It is assumed that sales of the golf discs in other markets would not be affected by this special order. If other sales were affected. Innova would have to consider the lost sales in making the decision. Second, if Innova is operating at full capacity, it is likely that the special order would be rejected. EXERCISE 7-4 Reject Order Accept Order Net Income Increase (Decrease ) Revenues $0 $900,000 (1) $900,000 Variable costs: Direct materials 0 400,000 (400,000) Direct labor 0 100,000 (100,000) Variable overhead 0 200,000 (200,000 ) Total variable costs
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Chp 7 additional solutions - EXERCISE 7-2 (a) Revenues...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online