The acceptance of a special order will improve overall net operating income so long as the revenue from the special order exceeds: Select one: a. the contribution margin on the order. b. the incremental costs associated with the order. c. the variable costs associated with the order. d. the sunk costs associated with the order.

Question

01-07-2020
Business

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The acceptance of a special order will improve overall net operating income so long as the revenue from the special order exceeds: Select one: a. the contribution margin on the order. b. the incremental costs associated with the order. c. the variable costs associated with the order. d. the sunk costs associated with the order.

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TenishaTon TenishaTon · Answer 1 · 2020-07-06T07:20:56+02:00

Answer: Option B

Explanation:

The acceptance of the special order will only improve the net operating income as long as it exceeds the incremental cost associated with the order.

Incremental cost can be defined as the amount of money which is required to produce the additional product or the special orders.

It is first calculated then only the profit can be decided based on the incremental cost. If the incremental cost is more then there is a loss and if the incremental cost is less and profit is more so there is a overall profit.