7 Sandra's Kreations just completed its best year, generating income of $28,000 from selling decadent wedding cakes and desserts. For abusiness that is only two years old and run from Sandra's own kitchen, this is quite an accomplishment. She has been asked to provide aspecial-event cake for one event per month at the local convention center, but at a reduced price of $430.While this is mostly fantastic news, Sandra realizes that she is already working at maximum capacity. If she commits to these events,she will need to either find additional capacity or reduce her regular wedding cake sales. The following income statement showsSandra's results from last year.SalesCOGSGross marginOperating expensesOperating income$200,000131,00069,00041,000$28,000Sandra's average selling price is $1,000 per cake; fixed-MOH costs are $67,000 and are included in COGS. All other product costs varybased on volume. Average variable operating expenses are $106 per cake; remaining operating expenses are fixed. After thinkingabout it further, she realizes she'll avoid the variable operating expenses on the special-event cakes. (c)Sandra would like to take on the special convention center events, but she is not willing to use her home for more than what she iscurrently using it, and she does not want to rent additional space. This means she will need to cut back on her regular sales by onecake per month for the next year. Given this scenario, what will her operating income be for next year?Total operating incomeToxtbook and Media$

As a part of analysis for accepting or rejecting the order, revenue and variable cost are compared…

Sandra's Kreations just completed its best year, generating income of $28,000 from selling decadent wedding cakes and desserts. For a business that is only two years old and run from Sandra's own kitchen, this is quite an accomplishment. She has been asked to provide a special-event cake for one event per month at the local convention center, but at a reduced price of $430. While this is mostly fantastic news, Sandra realizes that she is already working at maximum capacity. If she commits to these events, she will need to either find additional capacity or reduce her regular wedding cake sales. The following income statement shows Sandra's results from last year. Sales $200,000 COGS 131,000 트플 Gross margin 69,000 Operating expenses 41,000 Operating income $28,000 Sandra's average selling price is $1,000 per cake; fixed-MOH costs are $67,000 and are included in COGS. All other product costs vary based on volume. Average variable operating expenses are $106 per cake; remaining operating expenses are fixed. After thinking about it further, she realizes she'll avoid the variable operating expenses on the special-event cakes.

Sandra's Kreations just completed its best year, generating income of $28,000 from selling decadent wedding cakes and desserts. For a business that is only two years old and run from Sandra's own kitchen, this is quite an accomplishment. She has been asked to provide a special-event cake for one event per month at the local convention center, but at a reduced price of $430. While this is mostly fantastic news, Sandra realizes that she is already working at maximum capacity. If she commits to these events, she will need to either find additional capacity or reduce her regular wedding cake sales. The following income statement shows Sandra's results from last year. Sales $200,000 COGS 131,000 트플 Gross margin 69,000 Operating expenses 41,000 Operating income $28,000 Sandra's average selling price is $1,000 per cake; fixed-MOH costs are $67,000 and are included in COGS. All other product costs vary based on volume. Average variable operating expenses are $106 per cake; remaining operating expenses are fixed. After thinking about it further, she realizes she'll avoid the variable operating expenses on the special-event cakes.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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