Canosta, Inc.determined it must expand its capacity to accept a special order.Which situation is likely?
A)Unit variable costs will increase.
B)Fixed costs will not be relevant.
C)Both variable and fixed costs will be relevant.
D)The company should accept the order.

Question

Quizplus · Accepted Answer

If Canosta, Inc. is expanding its capacity to accept a special order, both variable and fixed costs will be relevant. Variable costs will increase with the expansion, and fixed costs will need to be considered in determining the total cost of production. Ultimately, the decision of whether or not to accept the order will depend on whether the revenues generated from the order will exceed the total relevant costs of production.