Since fixed costs remain constant in the short run, special orders should be accepted as long as the order price is greater than the variable costs. True or false?

Question

Isaiah Berger

Business

27 September, 04:54

Since fixed costs remain constant in the short run, special orders should be accepted as long as the order price is greater than the variable costs. True or false?

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Answers (1)

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Logan · Answer 1

The given statement is True.

Explanation:

In the short run, fixed costs remain the same. There are only variable costs that are incurring and changing the costs incurred in the manufacturing of the products. So a company should accept the special orders as long as the rice of the order is greater than the variable cost incurred in the production of that order. For example, if there is a bakery which bakes cakes. They have their fixed cost of baking oven, the Chef, electricity, etc. They usually bakes sponge cakes. So if they receive the order of Chocolate cake, they can easily get this order because the fixed costs are same, and there will be a slight difference in the making of chocolate cake that can be covered in the price of the cake. So as long as the variable costs of the product is less than the order price, the company should continue producing the special orders.