When pricing special orders in a situation where there is unused capacity, management should charge a price that is greater than the:

Question

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When there is unused capacity, the additional costs of manufacturing the product will be lower than the total costs of manufacturing the product. If management charges a price greater than the additional costs, it will still generate more revenue and contribute to covering the fixed costs, while leaving room for profit. Charging a price that covers all the costs of manufacturing the product may result in lower demand and lower profits.

When Pricing Special Orders in a Situation Where There Is