Question

In a decision about whether to accept or reject a special order, explain why it is important to know whether this a one-off decision.

Answer 1

In a decision about whether to accept or reject a special order, it is important to know whether this a one-off decision or not. If a decision regarding acceptance or rejection is taken for a one-time special order, then only relevant revenues and relevant costs (generally variable costs) are considered. The current production capacity is adjusted to handle the special order. However, the acceptance or rejection of special order is not a one-off decision, then there will need to review prices so that it can be possible to cover facility costs (there is a possibility of an increase in fixed costs). Necessary changes in production capacity are required so that all profitable business can be accommodated. Therefore, it can be said that for determining price and capacity, it is important to know whether this a one-off decision or not.