Asked by Janiel Samuels on Jun 12, 2024
Verified
If a company is operating at full capacity the incremental costs of a special order will likely include fixed manufacturing costs.
Incremental Costs
The additional costs incurred when producing an additional unit of a product or service.
Fixed Manufacturing Costs
Costs that do not change with the level of production, such as rent, salaries, and insurance, which are incurred regardless of output volume.
Full Capacity
The maximum level of output that a company can sustain to make a product or provide a service.
- Learn the criteria for making special order decisions, including considerations of capacity and incremental costs.
Verified Answer
RC
Roshan ChadhaJun 12, 2024
Final Answer :
True
Explanation :
If a company is already operating at full capacity, the incremental costs of a special order will include the cost of any additional raw materials or direct labor needed, as well as any additional fixed manufacturing costs associated with the production of the order.
Learning Objectives
- Learn the criteria for making special order decisions, including considerations of capacity and incremental costs.