If a special order is being considered when the product normally sells for $10, and relevant costs are $6 to produce a unit and $2 to sell the unit, which of the following decisions is the most likely to be chosen?
A)Accept the order if the sales price is $6 or more.
B)Accept the order if the sales price is $8 or more.
C)Accept the order if the sales price is at least $10.
D)Reject the order.

Question

Quizplus · Accepted Answer

The relevant costs to produce and sell a unit are $6 + $2 = $8. Accepting the order at a sales price of $8 or more would cover the relevant costs and provide a profit margin of at least $2 per unit. Accepting the order at a sales price lower than $8 would result in a loss. Therefore, option B is the most likely to be chosen.

If a Special Order Is Being Considered When the Product