The decision to accept a lower-than-normal selling price depends on the availability of excess capacity.

Question

Quizplus · Accepted Answer

If a company has excess capacity, accepting a lower selling price may still result in a profit since the cost of producing those additional units would be relatively low. However, if a company is at full capacity, accepting a lower selling price may not be profitable as the cost of producing those additional units would be higher. Therefore, the decision to accept a lower selling price is influenced by the availability of excess capacity.

The Decision to Accept a Lower-Than-Normal Selling Price Depends on the Availability