Outdoor Living Company Has Just Received a Special Order for 500

question 93

Multiple Choice

Outdoor Living Company has just received a special order for 500 hammocks.Outdoor Living has sufficient idle capacity to accept the order.Accepting the order will increase Outdoor Living's variable manufacturing costs.Variable selling and administrative costs would be unaffected.What is the minimum price that Outdoor Living should accept for the special order?

• A) A price equivalent to the hammock's variable manufacturing cost per unit
• B) A price equivalent to the hammock's unit contribution margin
• C) The same price that Outdoor Living charges its existing customers
• D) None of these answers are correct.

---

Definitions:

Short Position

An investment strategy where an investor sells borrowed securities anticipating a price decline, aiming to buy them back at a lower price for profit.

Price

The amount of money expected, required, or given in payment for something.

Electricity Futures

Financial contracts obligating the buyer to purchase, and the seller to sell, a specified amount of electricity at a predetermined price and future date.

Weather Futures

Financial contracts that allow market participants to hedge against or speculate on weather events, such as temperature or precipitation levels.