A Company Is Within Plant Capacity

question 90

Multiple Choice

A company is within plant capacity. It is contemplating whether a special order should be accepted. The order will not impact regular sales. If the company accepts the special order, what will occur?

• A) Incremental costs will not be affected.
• B) Net income will increase if the special sales price per unit exceeds the unit variable costs.
• C) There are no incremental revenues.
• D) Both fixed and variable costs will increase.

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Definitions:

Ownership

The state or fact of owning something, which can involve possessing property, shares in a company, or any asset that grants the owner legal rights and responsibilities.

Horizontal Mergers

A business consolidation that occurs between firms that operate in the same industry or production stage.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, resulting in the average cost per unit of output decreasing with increasing scale.

Conglomerate Merger

A type of merger where two companies operating in unrelated business areas combine their operations.