If an Entity Has Sufficient Spare Capacity It Is More

question 28

Multiple Choice

If an entity has sufficient spare capacity it is more likely to accept a special order because:

• A)under these circumstances any order will be profitable.
• B)management will not want to have employees idle.
• C)there is no opportunity cost to accepting the order.
• D)customers will always be willing to pay more for special orders.

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Definitions:

Margin of Safety

This is a financial metric that measures the difference between actual sales and the break-even point, indicating how much sales can decline before a business incurs a loss.

Percentage of Sales

A financial ratio that compares a particular figure or amount to the total sales of a company.

Dollars

The official currency of the United States, also used as a standard monetary unit in many other countries and economic contexts.

Break-Even

The point at which total costs equal total revenue, indicating that a business is neither making a profit nor a loss.