Outdoor Living Company has just received a special order for 500 hammocks.Outdoor Living has sufficient idle capacity to accept the order.Accepting the order will increase Outdoor Living's total variable manufacturing costs.Which type of cost is considered relevant to Outdoor Living's decision of whether to accept or reject the special order?

Question

Quizplus · Accepted Answer

Two primary characteristics distinguish relevant from useless information.Specifically,relevant information (1)differs among the alternatives and (2)is future-oriented.Relevant costs are frequently called avoidable costs.The raw materials to make the hammocks could be avoided if the special order is rejected;as such,it is relevant.The other costs are not relevant because the company will incur them whether it accepts or rejects the special order.

Outdoor Living Company Has Just Received a Special Order for 500