Paragon Products sells a special kind of navigation equipment for $1300.Variable costs are $900 per unit.When a special order arrived from a foreign contractor to buy 42 units at a reduced price of $1000 per unit,there was a discussion among management.The management accountant 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 increase the fixed costs, which will reduce the profitability of the order. Therefore, the vice-president's decision to decline the order would be supported if the company needs to hire additional staff. However, options A, B, and D are irrelevant to the decision because they do not directly affect the profitability of the special order.

Paragon Products Sells a Special Kind of Navigation Equipment for $1300.Variable