If a Decision Regarding Special Orders Is Based Only on Costs

question 88

Multiple Choice

If a decision regarding special orders is based only on costs, management should:

• A) Accept any order where the payoff covers the variable costs
• B) Accept any order where the payoff covers the variable costs and the direct fixed costs
• C) Accept any order that will help utilize excess capacity, regardless of the payoff
• D) All of these statements are true

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Definitions:

Cost Of Production Report

A detailed report that outlines the costs associated with the production of goods, including direct materials, direct labor, and overhead.

Job Cost Cards

Documents used to record and track the costs associated with a specific job or project, including materials, labor, and overhead.

Work In Process Inventory

Inventory that includes all the materials, labor, and overhead costs for products that are in the production process but not yet complete.

Custom-Made Goods

Products that are specially made to the specifications of a customer rather than mass-produced.