Paragon Products sells a special kind of navigation equipment for $1,200.Variable costs are $900 per unit.When a special order arrived from a foreign contractor to buy 40 units at a reduced price of $1,000 per unit,there was a discussion among management.The controller said that as long as the special price was greater than the variable costs,the sale would contribute to the company's profits,and so it should be accepted as offered.The vice-president,however,decided to decline the order.Which of the following statements,if true,will support the decision of the vice-president?

Question

Quizplus · Accepted Answer

If the company needs to hire additional staff to execute the order, it will incur additional fixed costs that were not factored into the decision to accept or decline the order. This could potentially reduce or eliminate any potential profit that could be made from the order. Therefore, it is a valid reason for the vice-president to decline the order. Options A and B are irrelevant to the decision, while option C does not provide clear support for either decision.

Paragon Products Sells a Special Kind of Navigation Equipment for $1,200.Variable