Question
Fact Pattern: Framar, Inc., manufactures machinery to customer specifications. It operated at about 75% of practical capacity during the year. The operating results for the
Fact Pattern: Framar, Inc., manufactures machinery to customer specifications. It operated at about 75% of practical capacity during the year. The operating results for the most recent fiscal year are presented below.
Top management has developed the pricing formula presented below. It is based upon the operating results achieved during the most recent fiscal year. The relationships used in the formula are expected to continue during the next fiscal year. The company expects to operate at 75% of practical capacity during the next fiscal year.
APA, Inc., has asked Framar to bid on some custom-designed machinery. Framar used the formula to develop a price and submitted a bid of $165,000. The calculations are given next to the pricing formula shown below.
If the bid is accepted, what is the increase in net income?
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