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 variable manufacturing costs.Variable selling and administrative costs would be unaffected.What is the minimum price that Outdoor Living should accept for the special order?

Question

Quizplus · Accepted Answer

The minimum price that Outdoor Living should accept for the special order is a price equivalent to the hammock's variable manufacturing cost per unit. This is because any price above the variable costs contributes to covering fixed costs and potentially generating profit, especially when there is idle capacity and fixed costs are unaffected by the order.

Outdoor Living Company Has Just Received a Special Order for 500