Final answer:
Award Plus should accept the special order if it increases operating income without long-term negative effects. Accepting the one-time order aligns with business principles of minimizing losses and maximizing profits in situations where operating income is positively affected. option c is answer
Step-by-step explanation:
The question pertains to whether Award Plus should accept a special order and its effects on operating income. Analyzing scenarios like this typically involves understanding concepts such as average variable cost, break-even point, and the implication of prices on whether a company should continue production or shut down. According to
it would be advisable for the company to accept the order. This conclusion directly relates to concepts illustrated in the provided figures which discuss cost adjustments and market equilibrium in response to changes in demand and supply.
Increase in supply is balanced with an increase in demand to keep equilibrium price constant in a constant-cost industry, as shown in (a) of Figure 8.8. Conversely, if supply cannot meet the rising demand due to scarcity of inputs or increasing wages, this leads to an increasing cost scenario, and the equilibrium price rises, as shown in (b). In case (c), the supply increases effortlessly owing to new technology or economies of scale, leading to a decreasing cost situation and a declining equilibrium price.
When applying these principles to the question at hand, if accepting the special order meets the condition of increasing operating income without long-term detriment, then the answer would be 'c. Increasing', meaning the company would experience an increase in operating income by accepting the one-time special order. option c is answer