When evaluating a special order,management should:
A)Only accept the order if the incremental revenue exceeds all product costs.
B)Only accept the order if the incremental revenue exceeds fixed product costs.
C)Only accept the order if the incremental revenue exceeds total variable product costs.
D)Only accept the order if the incremental revenue exceeds full absorption product costs.
E)Only accept the order if the incremental revenue exceeds regular sales revenue.

Question

Quizplus · Accepted Answer

When evaluating a special order, management should accept the order if the incremental revenue exceeds total variable product costs. This is because fixed costs are typically unaffected by the order in the short term, so the decision should be based on whether the additional revenue covers the additional costs directly associated with the order.

When Evaluating a Special Order,management Should