incremental income or loss
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
McIntosh Enterprises produces giant stuffed bears. Each bear consists of $12 of variable costs, $9 of fixed costs, and sells for $45. A wholesaler offers to buy 8,000 units at $14 each of which McIntosh has the capacity to produce. McIntosh will incur extra shipping costs of $1.25 per bear. Determine the incremental income or loss that McIntosh Enterprises would realize by accepting the special order.
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