Which of the Following Is a Major Consideration When Analyzing

question 77

Multiple Choice

Which of the following is a major consideration when analyzing a special order?

• A)The price must be high enough to cover any incremental costs to fill the order.
• B)The company must have a good stock turnover ratio.
• C)The profit margin of the special sale must be higher than the regular sales.
• D)The sunk costs of the decision must not exceed the irrelevant costs.

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Definitions:

Equivalent Units

A concept in cost accounting that converts partially completed units into a comparable number of fully completed units.

Conversion Costs

The sum of labor and overhead costs that are necessary to turn raw materials into finished products.

FIFO Method

First In, First Out; an inventory valuation method where the costs of the earliest goods purchased or produced are the first to be expensed.

Process Costing

A method of costing used for homogenous products, where it calculates the cost of each process or stage of production.