If a special order results in a positive contribution margin of $8 when the contribution margin for regular orders is $15, which of the following decisions is the most likely to be chosen?
A)Accept the order, because $8 per unit is generated as profit
B)Reject the order, because $7 per unit is lost
C)Accept the order, but only if the customer agrees to an increase in the selling price to match the $15 regular contribution margin
D)Accept the order, but only if the customer agrees to an increase of $7 in the selling price

Question

Quizplus · Accepted Answer

Accepting the special order is beneficial as long as the contribution margin is positive, meaning it covers the variable costs and contributes to fixed costs and profit. The difference from the regular contribution margin does not represent a loss but a lower profit margin.

If a Special Order Results in a Positive Contribution Margin