Outdoor Living Company has just received a special order for 500 hammocks.Outdoor Living has sufficient idle capacity to accept the order.Accepting the order will increase Outdoor Living's total variable manufacturing costs.Which type of cost is considered relevant to Outdoor Living's decision whether to accept or reject the special order?

Question

Quizplus · Accepted Answer

Raw materials to make the 500 hammocks are considered relevant costs because they are directly associated with the production of the special order and will change if the order is accepted or rejected. The president's salary, the production manager's salary, and depreciation on equipment are fixed costs that will not change with the decision to accept or reject the special order, making them irrelevant to this decision.

Outdoor Living Company Has Just Received a Special Order for 500