Each quarter Bluffs Company produces 30,000 units of a product that has variable costs of $70 per unit.Total fixed costs for the quarter are $990,000.A special order is received for 1,000 units at a price of $77 per unit.In deciding to accept or reject this special order, it is appropriate to consider the _____.
A)old fixed cost per unit of $33.00
B)difference between the offered price and the variable cost per unit
C)new fixed cost per unit of $31.94
D)difference between the two fixed costs per unit, which is $1.06

Question

Quizplus · Accepted Answer

It is appropriate to consider the difference between the offered price ($77) and the variable cost per unit ($70), which is $7. This will determine if the special order will generate a profit ($7/unit) or a loss, and if it is worth accepting or rejecting. The fixed costs per unit are not relevant in this decision as the order is for a specific number of units, and the old and new fixed costs per unit are not provided.

Each Quarter Bluffs Company Produces 30,000 Units of a Product