When excess capacity exists, the only relevant cost associated with a special order will usually be which cost?

Question

Quizplus · Accepted Answer

When excess capacity exists, the fixed costs have already been incurred and do not need to be considered in the decision-making process. The variable costs would be the only relevant cost associated with a special order, since they would be directly impacted by the production of the additional units. Administrative costs and allocated fixed costs would not be relevant to the decision as they would not be affected by the special order.

When Excess Capacity Exists, the Only Relevant Cost Associated with a Special