Each month, Tuttle Corporation produces 400 units of a product that has unit variable costs of $16.00. Total fixed costs for the month are $3,400. A special sales order is received for 100 units of the product at a price of $18 per unit. In deciding to accept or reject the special sales order, it is appropriate to consider the

Question

Quizplus · Accepted Answer

When deciding whether to accept or reject a special sales order, the relevant cost is the difference between the offered price and the variable cost per unit. In this case, the offered price is $18 per unit and the unit variable cost is $16. Therefore, the difference is $2.

Fixed costs are not relevant in this decision since they will be incurred regardless of whether the special sales order is accepted or rejected. Option A and Option B are incorrect because they refer to fixed costs per unit, which do not change based on the number of units produced or sold. Option D is also incorrect because it compares two fixed costs, rather than the relevant cost of the special sales order.

Each Month, Tuttle Corporation Produces 400 Units of a Product