210-Special orders

Question 1

Explain what is meant by special orders

Answer 1

Occasionally, businesses may receive orders for their products that differ. Difference is often based on: Price paid, The quantity of the order and the lead time.

Question 2

What can a special order involve?

Answer 2

-Selling the same product lower than the normal sales price
-Selling a modified product at a higher price

Question 3

What does the decision to accept a special order depend on?

Answer 3

The potential immediate and future quantitative and qualitative benefits that result from the order.

Question 4

What is the first stage in examining the value and impact of a special order

Answer 4

Contribution (quantitative) = Generated revenue - costs of production (VC)

Question 5

Factors that affect the decision to accept a special order

Answer 5

-capacity
-Labour demands
-Future orders
-Existing customers
-Product adjustment - if yes it could involve new materials, workers etc