If a special order is being considered when the product normally sells for $10 and relevant costs are $6 to produce a
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

For a special order, the company should accept if the selling price is higher than its relevant cost. In this case, the relevant cost is $6. Therefore, the company should accept the order if the selling price is higher than $6. However, accepting the order for a selling price of $6 means there will be no profit margin. Thus, the company should accept the order if the selling price is higher than the relevant cost of $6 and provides a profit margin. Therefore, the best choice is to accept the order if the selling price is $8 or more, which provides a profit margin of $2 per unit.

If a Special Order Is Being Considered When the Product