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Flavor Enterprises Has Been Approached About Providing a New Service

question 11

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Flavor Enterprises has been approached about providing a new service to its clients. The company will bill clients $140 per hour; the related hourly variable and fixed operating costs will be $75 and $18, respectively. If all employees are currently working at full capacity on other client matters, the per-hour opportunity cost of being unable to provide this new service is:

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Definitions:

Significant Influence

The capacity to affect the financial and operating policies of another entity without having control or full ownership, often through ownership of a sizable percentage of voting shares.

Net Income

The net profit figure for a company, achieved by subtracting all operational costs and tax liabilities from its revenue.

Common Stock

A form of corporate equity ownership, a type of security that represents ownership in a corporation and a claim on a portion of its profits.

Significant Influence

The power to participate in the financial and operating policy decisions of an investee, but not control them, typically associated with ownership of 20-50% of voting stock.

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