In Deciding Whether to Undertake a Special Order at a Reduced

question 14

Multiple Choice

In deciding whether to undertake a special order at a reduced price:

• A)the effect on existing customers should be considered.
• B)whether the order will make a contribution to fixed costs should be considered
• C)the opportunity cost of forgone regular sales should be considered
• D)all the options should be considered

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Definitions:

Investment Turnover

A ratio that measures the efficiency of a company’s use of its assets in generating sales or revenue; the ratio of net sales to average total assets.

Transfer Prices

Prices charged for the selling of goods and services between subsidiaries or divisions within the same company.

Variable Cost

Expenses that change in proportion to the level of production or business activity.

Negotiation

A strategic discussion that resolves an issue in a way that both parties find acceptable, often used in business to finalize deals, terms, and prices.