Asked by Carmen Mclaurin on Jul 30, 2024
Verified
If a company anticipates that other sales will be affected by the acceptance of a special order then
A) lost sales should be considered in the incremental analysis.
B) lost sales should not be considered in the incremental analysis.
C) the order should not be accepted.
D) the order will only be accepted if the plant is below capacity.
Incremental Analysis
An examination of the additional benefits of an activity compared to the additional costs incurred by that same activity.
Lost Sales
Potential sales that were not realized due to stockouts, capacity issues, or other factors that prevented the completion of a sale.
Special Order
An order placed by a customer that requires a company to make a product with specifications that differ from their standard product line.
- Gain insight into the guidelines for special order decision processes, emphasizing the analysis of capacity and incremental expenses.
Verified Answer
PG
Paulina GandaraAug 03, 2024
Final Answer :
A
Explanation :
If other sales are going to be affected, then lost sales should be considered in the incremental analysis to determine if the special order will be profitable overall. Ignoring the impact on other sales could result in an inaccurate analysis and a decision that ultimately hurts the company's bottom line.
Learning Objectives
- Gain insight into the guidelines for special order decision processes, emphasizing the analysis of capacity and incremental expenses.