Susan's Kreations just completed its best year, generating income of $39,000 from selling decadent wedding cakes and desserts. For abusiness that is only two years old and run from Susan'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 $410.While this is mostly fantastic news, Susan 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 showsSusan's results from last year.SalesCOGSGross marginOperating expensesOperating income$220,000(a)126,00094,00055.000$39,000Susan's average selling price is $1,000 per cake; fixed-MOH costs are $66,600 and are included in COGS. All other product costs varybased on volume. Average variable operating expenses are $109 per cake remaining operating expenses are fixed. After thinkingabout it further, she realizes she'll avoid the variable operating expenses on the special-event cakes.Your answer is incorrect.To keep her existing sales volume and take on the new convention center events, Susan would need to hire additional employeeswho would "invade" her home while she and her family sleep. Hiring dependable night-shift workers would increase her variableproduct costs per unit by 30%. If she maintains her existing sales and takes on the new events under these circumstances, howmuch total operating income will she show for next year?Total operating income$

To calculate the total operating income considering the special order the existing income is added…

Answered: margin from last ating expenses ating…

Business

Accounting

margin from last ating expenses ating income $220,000 126,000 94,000 55,000 $39,000

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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