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

---

Definitions:

FOB Shipping Point

A term that indicates the buyer takes responsibility for goods once they are shipped, and the point of departure marks the transfer.

Inventory Records

Documentation that keeps track of the quantities, locations, and values of a company's inventory, assisting in the management and control of stock.

FIFO Inventory Valuation

An accounting method for valuing inventory where the first items placed in inventory are the first ones sold, affecting cost of goods sold and ending inventory valuation.

Sales Revenue

The total amount of money generated from the sale of goods or services before any expenses are deducted.