A special order generally should be accepted if:
A)its revenue exceeds allocated fixed costs, regardless of the variable costs associated with the order.
B)excess capacity exists and revenue exceeds variable costs associated with the order.
C)excess capacity exists and the revenue exceeds allocated fixed costs.
D)the revenue exceeds total costs, regardless of available capacity.
E)the revenue exceeds variable costs, regardless of available capacity.

Question

Quizplus · Accepted Answer

A special order should be accepted if there is excess capacity and the revenue from the order exceeds the variable costs associated with it. This is because accepting the order will contribute towards covering the fixed costs and increasing overall profit for the company. Accepting the order if the revenue only exceeds the allocated fixed costs (option C) may not be optimal as it may not cover the variable costs or contribute towards profit. Options A, D, and E do not take into account the importance of excess capacity and variable costs.

A Special Order Generally Should Be Accepted If