Which of the following statements is true regarding special order decisions? a. Special order...

Question:

Which of the following statements is true regarding special order decisions?

a. Special order decisions are long-run decisions.

b. The sales price of a special order should never be below the price offered to regular customers.

c. Both quantitative and qualitative impacts should be considered.

d. Whether or not the company has excess capacity is seldom a consideration for special order decisions.

Relevant costing

Relevant costing is a branch of cost accounting that deals with the decision making process like whether to implement new process or not, whether to launch new products or not whether to accept special orders or not.

Answer and Explanation:

Statement d is true because under relevant costing excess capacity is considered while pricing the special audit. If company has the excess capacity contribution lost is ignored and minimum price can be the variable cost to be incurred ( which is below the regular price) but if company doesn't have the extra capacity the excess price = variable cost + contribution Lost


Learn more about this topic:

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Relevant Costs in Eliminating a Product or Segment

from Accounting 301: Applied Managerial Accounting

Chapter 9 / Lesson 12
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