If a company has excess capacity and present markets will not be affected it would be profitable to accept an order at a special unit price even though the price is less than the unit variable cost to manufacture the item.

Question

Quizplus · Accepted Answer

Accepting an order at a price less than the unit variable cost would result in a loss on each unit sold, as the company would not cover the variable costs of production. To be profitable, the special unit price must at least cover the variable costs.

If a Company Has Excess Capacity and Present Markets Will