A company is contemplating the acceptance of a special order. The order would not affect regular sales and could be filled without exceeding plant capacity. However, a new stamping machine would have to be purchased in order to stamp the customer's name on the product. Which of the following is likely?
A) Total variable costs will be irrelevant.
B) Only variable costs will be relevant.
C) Only fixed costs will be relevant.
D) Both variable and fixed costs will be relevant.

Question

Quizplus · Accepted Answer

Both variable and fixed costs will be relevant in determining the profitability of the special order. The cost of the new stamping machine is a fixed cost, and will need to be factored into the overall cost of fulfilling the order. Additionally, the variable costs of producing the product (such as materials and labor) will also need to be considered.

A Company Is Contemplating the Acceptance of a Special Order