ECONOMICS

Detailed explanation-1: -If a company has excess capacity and present markets will not be affected, it would be profitable to accept an order at a special unit price even though the price is less than the unit variable cost to manufacture the item. A company should never accept an order for its product at less than its regular sales price.

Detailed explanation-2: -Sunk cost is any cost that has already been incurred and that cannot be changed by any decision made now or in the future.

Detailed explanation-3: -A make-or-buy decision is an act of choosing between manufacturing a product in-house or purchasing it from an external supplier.

Detailed explanation-4: -The process used to identify the financial data that change under alternative courses of action is called incremental analysis.

Detailed explanation-5: -When deciding whether to accept a special order, management must consider several factors: The capacity required to fulfill the special order. Whether the price offered by the buyer will cover the cost of producing the products. The role of fixed costs in the analysis.