A company receives a special one-time order for 3,000 units of its product at $15 per unit. The company has excess capacity and it currently produces and sells the units at $20 each to its regular customers. Production costs are $13.50 per unit, which includes $9 of variable costs. To produce the special order, the company must incur additional fixed costs of $5,000. Should the company accept the special order? a. Yes, because incremental revenue exceeds incremental costs. b. No, because incremental costs exceed incremental revenue. c. No, because the units are being sold for $5 less than the regular price. d. Yes, because incremental costs exceed incremental revenue. e. No, because incremental costs exceed $15 per unit when total costs are considered.
A company receives a special one-time order for 3,000 units of
its product at $15 per unit. The company has excess capacity
and it currently produces and sells the units at $20 each to its
regular customers. Production costs are $13.50 per unit, which
includes $9 of variable costs. To produce the special order, the
company must incur additional fixed costs of $5,000. Should
the company accept the special order?
a. Yes, because incremental revenue exceeds incremental
costs.
b. No, because incremental costs exceed incremental
revenue.
c. No, because the units are being sold for $5 less than the
regular price.
d. Yes, because incremental costs exceed incremental
revenue.
e. No, because incremental costs exceed $15 per unit
when total costs are considered.
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