If a Special Order Results in a Positive Contribution Margin

question 137

Multiple Choice

If a special order results in a positive contribution margin of $8 when the contribution margin for regular orders is $15, which of the following decisions is the most likely to be chosen?

• A)Accept the order, because $8 per unit is generated as profit
• B)Reject the order, because $7 per unit is lost
• C)Accept the order, but only if the customer agrees to an increase in the selling price to match the $15 regular contribution margin
• D)Accept the order, but only if the customer agrees to an increase of $7 in the selling price

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Definitions:

Sway

The lateral movement of a vehicle, often undesirable, affecting its stability.

Grease Fittings

A small, nipple-like fitting threaded into a component for the injection of grease. A spring-loaded check ball inside the fitting allows grease in but keeps it from being pushed back out.

Zerk Fittings

Grease fittings installed on mechanical systems to allow for easy application of lubricant with a grease gun.

Control Arm Bushing

A component of the control arm in a vehicle's suspension system, made of rubber or polyurethane, designed to cushion the impact and reduce friction between the moving parts for smoother operation and handling.