If idle capacity exists, a special order must cover its full cost to be profitable.

Question

Quizplus · Accepted Answer

If idle capacity exists, the special order may still be profitable if it covers the variable cost and contributes towards covering the fixed costs that are already being incurred. In such cases, the special order may also generate additional revenue or benefits such as improved customer relations, increased market share, or enhanced reputation. Therefore, a special order does not need to cover its full cost to be profitable if it results in a net positive contribution to the overall profitability of the business.

If Idle Capacity Exists, a Special Order Must Cover Its