Which of the following must be true for a company to accept a special order?
A)Variable costs must be less than the contribution margin.
B)Incremental revenues must be greater than incremental costs.
C)Opportunity costs must be greater than total revenue.
D)Total fixed costs must stay constant.

Question

Quizplus · Accepted Answer

A company will accept a special order only if incremental revenues from the order are greater than incremental costs. In other words, the company must make a profit by accepting the special order. Option A is incorrect because variable costs do not necessarily determine whether a special order will be accepted or not. Option C is incorrect because opportunity costs can only be considered if there is a trade-off between the special order and regular business. Option D is irrelevant because fixed costs are not a deciding factor.

Which of the Following Must Be True for a Company