special orders

Question 1

what is a special order?

Answer 1

businesses receiving orders that differ in terms of the profile of their regular orders

Question 2

When there is a special order, what is the difference usually based on?

Answer 2

price paid
quantity ordered
lead time

Question 3

are special orders one off or establishing relationship with supplier?

Answer 3

both xx

Question 4

what 2 things can a special order involve?

Answer 4

same product sold at lower price
modified product sold at higher price

Question 5

what can be used to examine value and impact of special order?

Answer 5

contribution
difference between revenue per unit and variable cost per unit

Question 6

4 things which must be considered before accepting special order?

Answer 6

capacity - has business got the spare capacity
labour demands - extra hours needed?
future relationship?
will order upset customers paying higher price?
would production process have to change?

Question 7

4 pros of special orders?

Answer 7

further orders may follow
capacity utilisation
access to new markets and opportunities
can keep employees in job if normally less orders due to poor economic conditions
can raise cash quick

Question 8

3 drawbacks of special orders?

Answer 8

working at full capacity can affect quality
other customers may want same reduced price - may become resentful
this new pal may become cheeky and ask for even lower prices
will new pal get prioritised over existing customers?
sometimes not even profitable