A company is within plant capacity. It is contemplating whether a special order should be accepted. The order will not impact regular sales. If the company accepts the special order, what will occur?
A) Incremental costs will not be affected.
B) Net income will increase if the special sales price per unit exceeds the unit variable costs.
C) There are no incremental revenues.
D) Both fixed and variable costs will increase.

Question

Quizplus · Accepted Answer

Accepting the special order will result in incremental revenues from the order. If the special sales price per unit exceeds the unit variable costs, net income will increase. Incremental costs may be incurred to produce the special order, but as long as the special sales price per unit exceeds these costs, net income will increase. However, fixed and variable costs will not increase simply by accepting the special order.

A Company Is Within Plant Capacity