You overhear the manager of a sign shop say, "I'd never accept a special order! How could you ever make money selling products below full cost?" Do you agree? Why or why not?


Full cost includes an allocation of fixed overhead. After the break-even point, fixed costs have been covered and any sales price in excess of variable cost will provide additional net income. Thus, after break-even, any special orders with positive contribution margin will increase net income and should be considered for acceptance in the short run.

Business

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