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Use the following data for the next 2 questions:
A manufacturer operating with excess capacity has been asked to fill a special order at $7.25 per unit. The regular price is $10 per unit. No other use of the currently idle capacity can be found. The manufacturer's usual variable costs per unit are $3.50 for direct materials, $2.00 for direct labor, $1.00 for variable overhead, and $0.50 for sales commission. No sales commission would be paid on this special order. The average fixed overhead cost per unit is $0.25.
-Which alternative is more profitable and by what amount?
Net Income
Total earnings of a business, arrived at by subtracting all expenses and taxes from its overall income.
Dividends
Payments made to shareholders out of a corporation's profits, reflecting the company's earnings and financial health.
Common Stock
A type of equity security that represents ownership in a company, with rights to vote and share in dividends.
Statement of Financial Position
Another term for the balance sheet, detailing a company's financial status including assets, liabilities, and equity at a specific point in time.
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