Question

Accepting a special order is profitable whenever the revenue from the special order exceeds:

a. The materials and direct labor costs of producing the order.
b. The average unit cost of production multiplied by the number of units in the order.
c. The fixed manufacturing costs for the period.
d. The incremental cost of producing the order.

Answer 1

The correct answer is D

Step-by-step explanation:

Incremental cost is the cost or an expense which is aggregate incurred because of an extra unit of the product is being manufactured. It is computed through analyzing the extra cost involves in the process of production like raw materials.

So, any order or project would be profitable when the revenue or income from that order or project is more than the incremental cost of the manufacturing the order.