When deciding to accept a one-time-only special order from a wholesaler, management should ________.
A) consider the sunk costs and opportunity costs
B) not consider the special order's impact on future prices of their products
C) determine whether excess capacity is available
D) verify past design costs for the product

Question

Quizplus · Accepted Answer

Management should determine whether excess capacity is available before accepting a one-time-only special order from a wholesaler. This is because if excess capacity is available, then production can be increased without incurring additional fixed costs. Additionally, fixed costs can be spread over more units, and this can make it profitable to accept the special order. Other factors that management should consider include the incremental revenue from the special order, the incremental costs, and any potential impact on future prices of their products. Sunk costs and opportunity costs are relevant, but they should not be the only factors considered. Past design costs for the product may also be relevant, but they are not as important as determining whether excess capacity is available.

When Deciding to Accept a One-Time-Only Special Order from a Wholesaler