Canosta, Inc. determined that it must expand its capacity to accept a special order. Which situation is likely?
A) Unit variable costs will increase.
B) Fixed costs will not be relevant.
C) Both variable and fixed costs will be relevant.
D) The company should accept the order.

Question

Quizplus · Accepted Answer

If Canosta, Inc. determines that it must expand its capacity to accept a special order, both variable and fixed costs will be relevant. The company must consider the cost of the additional resources needed to produce the order and the cost of the additional facility or equipment needed for expansion. Therefore, the company needs to consider both types of costs when deciding whether to accept the special order.