If there is excess capacity, the minimum acceptable price for a special order mu
ID: 2530102 • Letter: I
Question
If there is excess capacity, the minimum acceptable price for a special order must cover:
only variable costs associated with the special order.
variable and fixed manufacturing costs associated with the special order.
variable and incremental fixed costs associated with the special order.
variable costs and incremental fixed costs associated with the special order, plus the contribution margin usually earned on regular units.
If there is excess capacity, the minimum acceptable price for a special order must cover:
Explanation / Answer
Answer:- If there is excess capacity, the minimum acceptable price for a special order must cover: variable and incremental fixed costs associated with the special order.
Explanation:-If there is any spare/excess capacity then organisation should charge only variable cost for any special order and such increased fixed cost which is incurred due to such special order.