In a special sales order decision, the special price must exceed the variable cost of filling the order. In other words, the special order must have
A)sunk costs.
B)a positive contribution margin.
C)opportunity costs.
D)a negative contribution margin.

Question

Quizplus · Accepted Answer

The special price must exceed the variable cost of filling the order in order to have a positive contribution margin. This means that the revenue from the sale must cover all of the variable costs associated with filling the order, as well as leave some contribution margin to cover fixed costs and contribute to profits. Sunk costs and opportunity costs are not relevant to this decision, and a negative contribution margin would mean that the company is losing money on the sale.

In a Special Sales Order Decision, the Special Price Must