Each quarter Sioux Company produces 30,000 units of a product that has variable costs of $60 per unit. Total fixed costs for the quarter are $990,000. A special order is received for 1,000 units at a price of $77 per unit. In deciding to accept or reject this special order, it is appropriate to consider the:

Question

Quizplus · Accepted Answer

The decision should be based on the contribution margin, which is the difference between the offered price ($77) and the variable cost per unit ($60). Fixed costs are not relevant as they do not change with the special order.

Each Quarter Sioux Company Produces 30,000 Units of a Product