a special sales order decision, the special price must exceed the variable cost of filling the order. In other words, the special order must have A. a positive contribution margin. B. a negative contribution margin. C. opportunity costs. D. sunk costs.

Question

Ellis Haas

Business

20 December, 06:59

a special sales order decision, the special price must exceed the variable cost of filling the order. In other words, the special order must have A. a positive contribution margin. B. a negative contribution margin. C. opportunity costs. D. sunk costs.

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Madisyn Hester · Answer 1

Answer: Option A

Explanation: In simple word, contribution margin refers to the difference between the total amount received from sales and the variable cost incurred to make that sales.

As variable cost is the cost that changes with the level of output or scale of operations then we can assume that a special order will bring some of the extra variable cost to the company.

Thus, if the company could exceed its revenue to the extent that the extra variable cost could be recovered then they should accept the special order.

Hence from the above we can conclude that the correct option is A.