Manganese company makes frames. a customer wants to place a special order for 750 frames in green with the company logo painted on the frame, to be priced at $60 each. normally, manganese would charge $100 per frame for this type of order. manganese figures that wood and glass will cost $20 per frame, variable overhead (machining, electricity) is $5 per frame, direct labor is $10 per frame. the employee's wages will be paid whether or not the special order is accepted. if manganese accepts the special order, by how much will operating income increase or decrease?

The answer is: Manganese's operating income will increase by $26,250

Explanation:

The total order is worth $45,000 (= 750 frames x $60 per frame).

Manganese will spend $20 in direct materials and $5 in variable overhead per frame, which adds up to $25 cost per frame.

Since Manganese will have to pay their workers salary with or without this special order, we can't consider additional labor costs associated with this special order.

So the total revenue is $45,000 and the total additional costs are $18,750.

So the operating income will increase by $26,250 which is the difference between total revenue and total costs (= $45,000 - $18,750)

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.

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