In Situations When Management Must Decide on Accepting or Rejecting

question 110

Multiple Choice

In situations when management must decide on accepting or rejecting one-time-only special orders, where there is sufficient capacity, which one of the following would not be relevant to the decision?

• A) Absorption (that is, full product) cost.
• B) Differential costs.
• C) Direct costs.
• D) Variable costs.
• E) Incremental costs.

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Definitions:

18-Month Insurance

This term refers to a prepaid insurance policy that covers a period of 18 months, recognized as an asset initially and expensed over the duration of the coverage.

Weekly Payroll

The total sum of all employee earnings paid on a weekly basis.

Supplies on Account

Supplies purchased by a company on credit, for which payment will be made at a later date, increasing accounts payable.

Historical Cost

The original monetary value of an asset or liability, recorded at the time of its acquisition or incurrence.