As long as fixed costs increase by less than the excess of incremental revenue over incremental cost, the acceptance of a special order will increase a company's net income.

Question

Quizplus · Accepted Answer

This statement is known as the "incremental analysis" approach and is a commonly used method for evaluating special orders. As long as the incremental revenue from the special order exceeds the incremental cost of producing and delivering the order, and the fixed costs associated with the order do not exceed the incremental revenue, then accepting the order will increase a company's net income.

As Long as Fixed Costs Increase by Less Than the Excess