Asked by Courtnie Marie on Apr 27, 2024
Verified
Which of the following is true if a company can accept a special order without affecting its regular sales and is within plant capacity?
A) Net income will not be affected.
B) Net income will increase if the special sales price per unit exceeds the unit variable costs.
C) Net income will decrease.
D) Additional fixed costs will probably be incurred.
Special Order
A one-time order that is not normally part of the company's standard operations.
Net Income
The total profit of a company after all expenses and taxes have been deducted from total revenues.
Unit Variable Costs
The variable costs incurred to produce a single unit of product.
- Understand the factors involved in special order decision-making, focusing on capacity and additional cost considerations.
Verified Answer
MA
MUHAMMAD ABRAR BHATMay 03, 2024
Final Answer :
B
Explanation :
If the special sales price per unit exceeds the unit variable costs, accepting the special order will result in additional contribution margin, which will increase net income. Since the special order can be accepted without affecting regular sales and within plant capacity, there should be no additional fixed costs. Therefore, net income will not be affected if the special order is accepted as long as it generates a positive contribution margin.
Learning Objectives
- Understand the factors involved in special order decision-making, focusing on capacity and additional cost considerations.