210 special orders

Question 1

what is a special order

Answer 1

• a business may receive orders for their product that differ in terms of the profile of their regular orders. the difference is oftern based on:
  
  • price paid
  • the quantity ordered
  • the lead time

Question 2

why might a business recieve special orders

Answer 2

• economic factors
• establish new relationships wiht new lrage important buyers- espcailly if buyer power is low
• based on financial position- cash may be needed quickly
• increases capacity utilisation
• cstomers may be planning events/ expansion

Question 3

what might a special order involve

Answer 3

• selling the same product lower than the normal sales price
• selling a modified product at a higher price

Question 4

how to calculate special orders

Answer 4

1. calculate total contribution of the special order
   -> selling price - variable cost per unit
2. contribution per unit x units sold =total contrubution

Question 5

reasons to accept the order

Answer 5

• further orders may follow
• space capacit is used
• new order may give acsess to new markets and new oppotunities
• keeps employees busy

Question 6

reasons to decline the order

Answer 6

• working at near or full capacity can put pressure on quality
• may focus more on speciaal orders c=than customers - impacting futrue sales
• customers might discover disvounted price to new cusotmers-unloyal-reduces market share