ACC 202 Chapter Notes - Chapter 8: Net Income, Income Statement, Accept (Organization)
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All revenue and costs are displayed in the income statement, then the difference in noi between two alternatives is compared. Management is considering a new labor saving machine that rents for ,000 per year. If they do rent the machine, direct labor costs will decrease to ,000. Accept a special order if its incremental revenue exceeds the incremental expense of producing it. A company makes a single product normally selling for per unit. A foreign distributor offers to purchase 3,000 units for per unit. This is a one-time order that would not affect the company"s regular business. Annual capacity is 10,000 units, but the company is currently producing and selling only 5,000 units. Yes, if the increase in revenue exceeds the increase in costs. Increase in revenue (- = ) >(3,000 *) Increase in costs (,000/5,000 = ) >( 3,000 * )
