Donald Is the Sales Manager of DVL Corporation

question 71

Essay

Donald is the sales manager of DVL Corporation. He is considering accepting a special order with a positive contribution margin. The order would require the company to purchase special equipment. Nevertheless, Donald estimates that the special order would contribute $10,000 to DVL's profits during the current quarter. Discuss the factors that Donald should consider in deciding whether to accept the special order.

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Definitions:

Joint Operation

An arrangement where two or more parties undertake an economic activity that is subject to joint control, where the parties have rights to the assets and obligations for the liabilities.

One-Line Method

An accounting technique used in the consolidation of financial statements where a parent company reports the net assets and results of a subsidiary in a single line.

Joint Venture Liabilities

The financial obligations that are incurred jointly by partners in a venture, which must be settled together.

Line-by-Line Method

A consolidation technique where the parent company combines its subsidiary's assets, liabilities, income, and expenses line by line into its own financial statements.