Which of the following statements is true of fixed costs of production in determining whether to accept or reject a special order?
A)They are increased in proportion to the amount that production increases when a special order is accepted.
B)They are often considered relevant if the plant is operating at capacity.
C)If the order can be completed without creating additional fixed costs, they are relevant.
D)They are always relevant in the decision.

Question

Quizplus · Accepted Answer

Fixed costs are considered relevant in the decision to accept or reject a special order if the plant is operating at capacity and accepting the order would require expanding capacity or incurring additional fixed costs. Otherwise, fixed costs are typically not changed by the decision to accept or reject a special order, making them irrelevant to the decision if the existing capacity is sufficient to fulfill the order without incurring additional fixed costs.

Which of the Following Statements Is True of Fixed Costs