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 variable manufacturing costs.Variable selling and administrative costs would be unaffected.What is the minimum price that Outdoor Living should accept for the special order?

Question

Quizplus · Accepted Answer

If the relevant revenue exceeds the relevant (avoidable)costs,the special order should be accepted.As such,the minimum selling price should equal the relevant cost per unit.The relevant costs in a special order decision are the unit-level and batch-level costs that will be incurred if the special order is accepted.In this situation,the variable manufacturing cost per unit is the relevant cost.

Outdoor Living Company Has Just Received a Special Order for 500