A special order generally should be accepted if:
A) its revenue exceeds allocated fixed costs, regardless of the variable costs associated with the order.
B) excess capacity exists and the revenue exceeds all variable costs associated with the order.
C) excess capacity exists and the revenue exceeds allocated fixed costs.
D) the revenue exceeds total costs, regardless of available capacity.
E) the revenue exceeds variable costs, regardless of available capacity.

Question

Quizplus · Accepted Answer

Excess capacity means the company can handle the special order without incurring additional fixed costs. Therefore, as long as the revenue from the special order exceeds all variable costs associated with it, the order should be accepted because it will contribute positively to covering fixed costs and increasing overall profit.

A Special Order Generally Should Be Accepted If