Question

mcq

When making a decision to accept a special order, management must consider

the impact that additional manufacturing time will have on unit costs of its current products.

whether the purchaser will accept additional high costs of a special order.

whether a lower price will convince the purchaser to become a regular customer.

whether capacity exists to meet the demand of the order.

Answer 1

When making a decision to accept a special order, management must consider, whether capacity exists to meet the demand of the order.

Note - Whether the purchaser will accept additional high costs of a special order is decision relevant for purchaser. Rest of the options are also irrelevant.

It is to be checked that contribution from special order is more than variable costs and fixed costs of special order are less than net profit. Whether total profits are maximised or not after accepting special order is to be checked.

Therefore, the correct answer is option 4th.