When there is excess capacity, it makes sense to accept a one-time-only special order for less than the current selling price when:
A)incremental revenues exceed incremental costs
B)additional fixed costs must be incurred to accommodate the order
C)the company placing the order is in the same market segment as your current customers
D)it never makes sense

Question

Quizplus · Accepted Answer

Accepting a one-time-only special order for less than the current selling price makes sense when incremental revenues exceed incremental costs. This means that the company will still make a profit from the order, even though it is selling at a discounted price. If additional fixed costs must be incurred to accommodate the order, then it might not make sense to accept it, depending on the extent of these costs. Whether the company placing the order is in the same market segment as your current customers is not necessarily relevant to the decision. It is not true that it never makes sense to accept a one-time-only special order for less than the current selling price - it depends on the specific circumstances.

When There Is Excess Capacity, It Makes Sense to Accept