Which of the following costs is NOT relevant to a special-order decision?
A)the direct labor costs to manufacture the special-order units
B)the variable manufacturing overhead incurred to manufacture the special-order units
C)the portion of the cost of leasing the factory that is allocated to the special order
D)all of the above costs are relevant

Question

Quizplus · Accepted Answer

Costs that are relevant to a special-order decision are ones that will change if the special order is accepted, and are typically incremental costs (i.e. costs that would not be incurred if the order is declined). Direct labor costs (A) and variable manufacturing overhead costs (B) would both be incurred to manufacture the special-order units, so they are relevant costs. However, the cost of leasing the factory (C) is a fixed cost that would not change with the acceptance or rejection of a special order and therefore is not relevant to the decision.

Which of the Following Costs Is NOT Relevant to a Special-Order