Special order decisions should be made using variable costing because:
A)Special order decisions usually focus on fixed costs
B)Variable costing includes all overhead costs in the calculation of product costs.
C)Only variable costs will increase as a result of the special order.
D)All costs,including variable and fixed costs,must be covered by the special order pricing.
E)Fixed overhead costs will change as a result of the special order.

Question

Quizplus · Accepted Answer

Special orders typically involve incremental production above and beyond what a company is currently producing. As a result, fixed costs are not affected by the special order. Variable costing allows us to isolate the incremental variable costs associated only with the special order and helps determine if the price offered for the special order is sufficient to cover those costs.

Special Order Decisions Should Be Made Using Variable Costing Because