A Special Order Generally Should Be Accepted If

question 65

Multiple Choice

A special order generally should be accepted if:

• A) its revenue exceeds allocated fixed costs, regardless of the variable costs associated with the order.
• B) excess capacity exists and the revenue exceeds all variable costs associated with the order.
• C) excess capacity exists and the revenue exceeds allocated fixed costs.
• D) the revenue exceeds total costs, regardless of available capacity.
• E) the revenue exceeds variable costs, regardless of available capacity.

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Definitions:

Activity-based Costing

A method of costing that identifies individual activities as fundamental cost objects and assigns costs to them based on their use of resources.

Idle Capacity

Represents the condition where production resources are not used to their full potential, resulting in unutilized capacity.

Plantwide Overhead Rate

A single overhead absorption rate used throughout a manufacturing plant to allocate overhead costs to products.

Activity-based Costing

A costing method that allocates overhead and indirect costs to specific activities, providing a more accurate representation of the costs associated with producing a product.