Minor Electric Has Received a Special One-Time Order for 1,500

question 127

Multiple Choice

Minor Electric has received a special one-time order for 1,500 light fixtures (units) at $5 per unit. Minor currently produces and sells 7,500 units at $6.00 each. This level represents 75% of its capacity. Production costs for these units are $4.50 per unit, which includes $3.00 variable cost and $1.50 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of
$1,000 with a zero salvage value. Management expects no other changes in costs as a result of the additional production. Should the company accept the special order?

• A) Yes, because incremental revenue exceeds incremental costs.
• B) Yes, because incremental costs exceed incremental revenues.
• C) No, because the incremental revenue is too low.
• D) No, because incremental costs exceed incremental revenue.
• E) No, because additional production would exceed capacity.

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Definitions:

Vasculitis

Inflammation of the blood vessels that can cause walls to thicken, narrow, weaken, or scar, affecting blood flow and leading to various complications.

Capillary

Tiny blood vessels connecting arterioles and venules, where the exchange of water, oxygen, carbon dioxide, and many other nutrient and waste chemical substances between blood and tissues occurs.

Anticoagulant

A substance or drug that prevents blood clotting, thereby reducing the likelihood of blood clots forming in the body.

Antihemorrhagic

A substance or treatment that prevents or stops bleeding.