The Selection of a Special Order Will Improve Net Profit

question 27

Multiple Choice

The selection of a special order will improve net profit when the order's income exceeds:

• A) the direct labour cost of the order.
• B) the replacement cost of the order.
• C) the incremental cost of the order.
• D) the opportunity cost of the order.

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Definitions:

Standard Cost Variances

The differences between the actual costs incurred and the standard costs previously set for materials, labor, and overhead in manufacturing.

Labor Efficiency Variance

The difference between the actual number of labor hours worked and the standard hours expected, multiplied by the standard labor rate.

Labor Rate Variance

The difference between the actual cost of labor and its expected cost based on standards or budgets.

Direct Labor Employees

Workers who are directly involved in the manufacturing of products, including those who operate machinery, assemble products, or perform manual labor that can be directly attributed to specific goods or services.