Variable and fixed costs, profitability of order, opportunity cost Healthy Hearth specializes in lunches for health-conscious people.
Question:
(a) Suppose Healthy Hearth has sufficient idle capacity to accommodate the government order for next month. What will be the impact on Healthy Hearth’s operating income if it accepts this order?
(b) Suppose that Healthy Hearth would have to give up regular sales of 500 meals, at a price of $4.50 each, to accommodate the government order for next month. What will be the impact on Healthy Hearth’s operating income if it accepts the government order?
Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
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Related Book For
Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young
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