Question

What are five different types of decisions that could use incremental analysis? What are the relevant costs in accepting an order at a special price?

Answer 1

Five different types of decisions that could use incremental analysis are:

1. To Accept a special order

2. Make or buy a product or component

3. To process a product further or sell as it is.

4. To repair, retain or replace the equipment or machinery.

5. To eliminate a business segment or product.

Relevant Costs are accepting the Special Order:

1. Costs that are incurred to produce special order (For example, direct material, direct labor etc.)

2. Additional costs that are incurred for completing the special order (For Example, shipping expenses, packing expenses, extra machine purchased etc.)